USD/JPY – The Only Thing You Need

A bit of “make it or break it” mentality here this morning as The Nikkei has pushed higher ( with JPY now trading down to it’s “hard-line of support” ) with The U.S Dollar pushing near term highs – where it was turned back in both January and a February re-test.

This puts EUR at “its major line of support” at 1.34 as well GBP “just hanging around” the upper sloping trend line ( daily trend still very much up ) near 169.50

A significant junction to say the least, as correlations across currencies suggest “a move” is certainly pending.

Currency markets should likely make a solid move here in coming days – breaking the summer doldrums.

Transports have clearly broken below support suggesting further decline, and The Dow is now under the “previously suggested top” at 16, 950.

I’ve essentially had this boiled down to a “risk on vs risk off” mentality as of late considering all the larger geopolitical factors, coupled with continued “poor data” coming out of Japan. The Yen has been the largest driving force of this continued rally in risk, as the continued printing, then conversion to USD and purchase of U.S Equities works it’s magic. The Fed passes the buck to The Bank of Japan to do the heavy lifting.

Consider 200 billion per month in paper coming out of Japan, compared to the now “only 35-45 billion” from The Fed to put this in perspective.

JPY_Breakout_Breakdown

JPY_Breakout_Breakdown

 

Japan is where the money is coming from.

A close eye on the current “range” on currency pair USD/JPY is really all you’ll need.

Break out – or breakdown?

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U.S GDP To Disapoint – Markets Already Know It

There is absolutely no “possible way” tomorrow’s second quarter GDP release from the U.S will meet expectations. It’s impossible in any real world terms.

However, considering the “unprecedented times” we find ourselves in as of late ( where employment data is now consistently fudged, housing numbers, PPI, not to mention U.S media coverage of just about everything on Earth ) one has to wonder “just how far they’ll go tomorrow” or if we’ll honestly get a fair kick at the can.

A number under 3% growth would essentially suggest that ( coupled with Q1’s “disaster nose dive” of -2.9% ) The U.S will have generated 2 straight quarters net negative growth – signaling recession.

Recession – a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

Now you’d have to appreciate the significance of this, when you consider 6 straight years of printing money like toilet paper / propping up the largest Ponzi scheme known to man, with a consistant message to  “the people” that everything has been moving according to “plan”.

Only to find yourself in recession?

I find it very hard to imagine we’ll get an accurate/legit  number but “even still”……anything, and I mean “anything” less that 3 % and Houston?

I think we’ve got a real problem here.

This could very well be the “event” we’ve been looking for to break out of these horrible / dead / ranging / flat currency markets so…traders should “most certainly not” take this one for granted.

Watching Commodity Currencies – What Can Be Learned

It’s pretty common knowledge that the currencies of countries with “commodity related economies” such as Australia, New Zealand and Canada are seen as the “darlings of the currency markets” during times when investors feel safe.

Simply put, large institutional investors are able to borrow money such as U.S Dollars or Japanese Yen at extremely low rates of interest, then use these funds to invest in currencies / countries where higher yields and greater opportunities can be found. Australia with its mining / gold related businesses, as well Canada with its oil as a couple of good examples.

The trouble is, as attractive as some of these investment’s may appear during times of economic expansion and loose monetary policy ( with both The Fed and The Bank of Japan flooding the planet with cheap money ) the currencies of these commodity related economies are not widely held, lack liquidity and are not generally sought during times of contraction and tightening.

To a certain extent you can almost consider them the Twitters and Facebooks of the currency markets. Relatively large, fast moves higher when times are good and investors feel safe – but equally the opposite movement when things start to go south.

Think of it like this. If suddenly the world fell into chaos and you were trapped on holidays in The Caymens, unable to return home to your family and friends. What currencies would you look to have there in your pocket / bank account? A handful of Aussie Dollars likely won’t do the trick.

So what can be learned by following these currencies? Can they give you any indication of future movements in global appetite for risk?

Lets have a look.

Australian_Dollar_During_Risk_Aversion

Australian_Dollar_During_Risk_Aversion

As an extreme example we can see prior to the crash of 2008 that the Australian Dollar had enjoyed a fantastic run while times where good – only to then wipe out six years of gains in a matter of months. Commodity related currencies across the board got completely hammered as fearful investors did all they could to get back to the “relative safety” of the currencies originally borrowed – those being the U.S Dollar and Japanese Yen.

Since Central Banks have been printing money like mad since 2009 investors have enjoyed nearly 6 years of bliss, borrowing said funds at extremely low rates of interest and investing where yields can be found.

I’m not suggesting you’ll see another 2008 scenario play out tomorrow, but by keeping an eye on the commodity currencies you may certainly get a bit of lead time – should things turn.

Would You Trust This Guy? – I Would

Ya that’s me dipshit – so what?

You already know I’m from another planet so – what’s the big deal?

Ya ya…..the “reptilian thing” – I hear it all the time. Those “eyes” go back generations bud, so you can chalk it up to genetics. Whatever.

Key thing is……my eyes are open.

The Ukrainian Prime Minister and his “entire cabinet” have now stepped down, as The Ukraine is unwilling to be “strong armed” by The IMF and the ridiculous parameters set forth, in order for it to secure further funding and “supposedly” salvage it’s economy.

The IMF / Western clowns / Obama just took another punch in the face as now “even Germany” is  looking to “swing East” and keep the lights on / gas flowing a little longer.

What? You haven’t heard? No big story on your local news / CNN?

I thought not. It’s summer – no need to be concerned.

Grab another burger and “for sure” drink another liter or two of Coke – you’ll be fine.

 

 

 

Equities Exhausted – USD Double Top

It’s been a tough grind here as of late, with such low volume trading leaving so many asset correlations stuck in the mud. Traders looking for the usual “signals” in one asset class with hopes of “putting it all together” have been pushed around and pulled back and forth – left struggling to “find an answer” within the continued “day-to-day chop”.

A tough market to navigate with Central Bankers hiding behind every corner, and with such low volume it would appear that on many days…..the market just seems to be sitting there – doing nothing.

Oil looks to be heading lower here and USD appears tired now sitting at its near term “double top” ( as seen via $dxy ).

Gold’s pullback appears to be resolving itself – sputtering out at a pretty solid area of support around 1292.00, while U.S Equities ( as well EU equities and Japan ) look weak, tired and exhausted.

Does anyone else expect that next weeks “U.S GDP report” will disappoint? And that perhaps markets are “finally considering” things aren’t nearly as rosy as the U.S Media continues to suggest?

It would have to have been “some kind of amazing quarter” ( the past 90 days only ) for the report to make up for the incredible ” -2.9 % loss in growth”  reported in the first quarter now wouldn’t it?

Stars would clearly align with USD moving lower, gold moving higher and “global equities” finally taking a break after the SP 500 has made it nearly 800 days straight without a meaningful correction.

Food for thought moving into next week. Perhaps you’ll want to take a peak at your computer / trade account a little more regularly.

Have a good weekend everyone. Enjoy the sun!

 

 

BRICS Nations – Bypass Washington With New Bank

I’m sure you are familiar with the “BRICS” nations ( being Brazil, Russia, India, China and South Africa ) right?

Well…..disatisfied with The United States “overwhelming influence on global finance” these fellows ( accounting for almost half the world’s population and about a fifth of global economic output ) have recently put their heads together ( and lots of money ) and started “their own” development bank.

The New Development Bank (NDB), formerly referred to as the BRICS Development Bank,is a multilateral development bank operated by the BRICS states (Brazil, Russia, India, China and South Africa) as an alternative to the existing World Bank and International Monetary Fund.

The 100 billion dollar bank ( complete with another $100 billion currency reserves pool ) is aimed at funding infrastructure projects in developing nations, and will be based in Shanghai, providing these nations with access to funding “outside” the usual channels of World Bank or IMF funding.

The genie is clearly out of the bottle here, as a growing number of extremely powerful and influential nations continue to move further and further away from Washington’s insane monetary policy and stranglehold on global financial movements.

You wanna impose more sanctions on Russia? You want to keep printing U.S Dollars like toilet paper? Have at it Obama – knock yourself out.

A major game changer here as The NDB has finally arrived.

more here: http://thediplomat.com/2014/07/3-reasons-the-brics-new-development-bank-matters/

 

A Question? – For Fellow Forex Traders

You are all hotshots – I know.

So…..tell me.

As many of you have suggested “trading the fundamentals” is akin to “reading the entrails of dead animals” ( essentially suggesting that “pure technical analysis” is sufficient ) – what are your thoughts on USD/JPY?

JPY ( Japanese Yen ) being the largest contributing factor in the current and seemingly “never ending rally in risk” ( as Japan’s “printing machine” currently dwarfs that of The United States ) – why isn’t USD/JPY making “massive upside moves” along side the ridiculously manipulated run up in U.S Equities?

If currency markets where “taking the bait” wouldn’t we see USD/JPY bursting higher, then higher, and even higher alongside the current ponzi playing out in U.S Equities?

USD_JPY_July_23_2014

USD_JPY_July_23_2014

From a purely technical perspective the chart pattern seen above ( a descending triangle ) is extremely bearish – suggesting that the pair will “eventually break through support” and likely waterfall lower.

The Central Banks of both Japan and The Unites States are hell bent on preventing this from happening but…..would you imagine the opposite?

Risk at all time highs…but the “ultimate suggestion” of risk ( borrowing JPY at 0% and investing it in U.S Equities” in seeking yield ) hasn’t done jack shit for the past 6 months.

I invite you all to weigh in – as fellow readers can only benefit from the potencial “pissing match ” to ensue.

Perhaps a cat’s got your toungue? Or maybe you’re out in the back yard now…looking to kill one and have a good look at it’s insides – with hopes of figuring this out.

Good luck with that.

 

Video News From Ukraine – No Teleprompter Used

With respect to the downed airliner in Ukraine I wanted to post the following video.

Not to voice an opinion on “who is to blame” for this tragedy but to provide the “average westerner” an opportunity to see / hear “something” other than the usual propaganda smeared across televisions, pointing fingers and placing blame.

We’ve all grown to accustom to the “usual news delivery” with shiny happy plastic people, sitting in fancy news studios, reading off of teleprompters, telling the general populus exactly what they are “supposed to” tell you – often with little “or no” objective view. At least in the example below you at least get a sense of what’s “really going on” as….they are actually there reporting!

 

Forex, Stocks And Gold – Trading The Week Ahead

The updates trade table offers little in the way of “new trades” here as of this morning, as last Thursday’s “drop” and in turn Friday’s “pop” has left the higher time frames unchanged, and more or less “yellowed the waters” shorter term.

Weekly_Forex_Overview_Sunday_July_20_2014

Weekly_Forex_Overview_Sunday_July_20_2014

 

What may be of particular interest to you this week will be USD, and “yes once again” the debate as to which way she’ll go ( with conviction and follow through ) should we see this distribution environment “flip” to something with a little more trend / conviction either way.

We’ve got JPY and its related pairs under the thumb, with eyes on Nikkei if considering to “beef up / add ” to any positions under our current framework. Ideally we’ll want to see JPY “breakout” from it’s ascending triangle moving higher…as “appetite for risk” moves inversely lower.

NZD in particular remains weak here this morning, but Thursday brings with it “another possible rate hike” out of New Zealand. It’s my thinking perhaps they “hold off” on an additional hike here and perhaps markets have already suspected as much but….that’s just speculation.

Still no aggressive trades in EUR, GBP vs USD as I want to give it another day or so to see if  USD turns lower here as I expect it to.

A weak open here as Japan was weak overnight as well EU stocks so…..it remains to be seen of “the machine’s that be” will again step in at the U.S open and work their “usual magic” to keep this thing flying a little longer.

Comments from both The BIS ( Bank of International Settlements) as well the IMF “AND” even The Fed suggesting that it’s getting a little out of hand here – with public perception and the underlying fundamentals now clearly out of touch with reality.

Gold miners entries as of a few days ago remain strong, and the final “short SP 500″ added at 1956.00 ( via Sept 191 puts ) appears to be holding its own.

 

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Inflation Hits – Coconut And Lime Prices Surge

Considering that I buy 10-12 limes and at least 5 or 6 coconuts per week, not to mention 6-8 avocados and copious amounts of Habanero chili’s, you can imagine that over time, I’ve grown quite accustom to the general price of these items – that being pretty close to zero.

Seriously…if I’d ever imagined “checking and then re checking my receipt” concerned about getting ripped off purchasing any of these standard items well….the thought had never crossed my mind.

Until now.

Limes are through the roof!  The coconuts have tacked on an additional 20% since just last week, and don’t even get me started on the avocados! Outrageous!

Ok….a little humour here as…..it’s really not “outrageous” ( as everything still pretty much costs nothing ) but it does bring about an interesting point / issue.

Inflation is being seen in everything – everywhere.

I am completely dumfounded as to how a single “locally grown” coconut  could possibly cost more than a single can of beer, packaged in its aluminum can with its fancy logo, cold storage, transportation and manufacturing all factored in. Amazing.

The people of Mexico are feeling it too, as recent tax hikes have put pressure on retailers who’ve really had no choice but to raise prices – in turn passing the expense on to the customer.

Have you got an example of inflation in your local area? Something that you’ve noticed as of late that might be “putting the pinch” on spending?

Please do tell as I find it absolutely fascinating to see/hear/ understand how others are seeing this phenomenon manifest in “their” daily lives.

As an aside…..I’m strongly considering buying more beer in the future……..and perhaps saving the coconuts for weekends and special occasions only.