Markets On The Cusp – USD Shakeout

We’re looking for a stronger dollar these days, as the reality of continued Fed tapering and a generally disappointing earnings season ( in my opinion ) begin to take their toll.

As we’ve discussed here in the past, the general effect of tightening the money supply “eventually” leads to higher lending rates/increased borrowing costs, pinching corporate earnings and pressuring stock valuations.

I think it’s fair to say we’ve most certainly seen the “mojo” taken out of the “momo” stocks in the tech sector already, as well the $BKX Bank Index ( which I follow as an additional “bellweather” for U.S Equity strength ) as it “continues” to on its path of “lower highs” and “lower lows”.

Via currencies I’ve been positioned “generally short” for several weeks now seeing AUD/JPY top out around 94.50 as well The New Zealand Dollar finally rolling over. CAD took its last breath here in just the past two days essentially “completing the trio” of risk related currencies to begin their journeys downward.

Pushing through the last remaining day or two of chop in USD, opens the flood gates “wide” to a plethora of excellent “medium term” trade opportunities long the safe havens, and short the commods.

My expectation is to see The Nikkei ( The Japanese Stock Index ) continue to lead markets “decidedly lower” ( and I’m talking like….Nikkei at 11,500 now at 14,500 type lower ) as the general lay of the land has obviously already shifted to a “risk off” / safety seeking environment.

For those interested in more specific and detailed “trade ideas”, regular “intermarket analysis” as well deeper learning / understanding of forex markets – please join us at www.forexkong.net as our trading community continues to grow.

9 Responses

    • Forex Kong April 30, 2014 / 8:20 am

      It’s very difficult to speculate GBP as it doesn’t serve the role of risk related “or” safe haven ( although getting close to safe haven ).

      You need to pick your pairs Farhan…taking into consideration “both currencies” in relation to each other.

      In my view….you are seeing a small “dip” in USD across the board and not “anything new” in GBP.

      It takes practice but…..is GBP really much “stronger”? or in the single pair GBP/USD is it really USD making the move?

      • Farhan Nasir (@FaniNasir) April 30, 2014 / 8:34 am

        compare to other currencies risk related or safe heavens GBP has been performing better than the rest one can clearly see that ,, but read somewhere british government dont want a strong pound so cant be certain about the GBP direction ,, and right now well USD no came in bad that has pushed GBP up ,,

        • Forex Kong April 30, 2014 / 8:38 am

          Hmmmmmm…..

          I think you’ve got to evaluate the current landscape “first” Farhan …..then look at the “specific governments / monetary policy / chatter”.

          No on “wants” a strong currency Farhan…as this is / was a “race for the bottom” with everyone looking to devalue.

          The shift in the U.S Fed to continue and hold true to it’s decision to taper, and taper and taper refects the true reality of what’s coming.

          Interest rates will rise, and currencies will then make the shift “away from devaluation” as monetary policy “planet wide” tightens.

          Interest rates up = stronger currency

  1. Farhan Nasir (@FaniNasir) April 30, 2014 / 9:04 am

    no doubt its race to the bottom ,, everything starts with the fed they first started QE and everyone followed now they started to cut it down n everyone again follows ,, . lets see what yellen has to say tonight , .

    • Forex Kong April 30, 2014 / 9:07 am

      It “was” a race for the bottom….but the forward looking trader “must assume” interest rates will rise, and in my view much sooner than the Fed will ever say.

      This changes the fundamental landscape in one of the most MACRO ways possible, as we shift from a time of “loose monetary policy” to a time of “tightening monetary policy”.

      Most people will hang on far too long “still hoping / expecting” the bubble of free money to keep things moving higher, but the active trader “already sees the shift” in markets at the highest MACRO level.

      It’s time to get the F out, and be thankful you’ve managed to survive, let alone make a few bucks.

      • Forex Kong April 30, 2014 / 9:11 am

        Markets are at near all time highs still!

        Yellen will having nothing to offer the hopefuls this afternoon / this evening. If she fips the QE switch “higher” markets will tank anyway, as it just goes to further expose the true state of the American economy.

        She can jawbone all she likes – markets make the turn now – with or without her.

        • Forex Kong April 30, 2014 / 9:32 am

          A quick aside as I do hope readers are tuning in here in the Daily comments – CAD is seriously looking “extremely good” for yet another solid short on risk here.

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