Perhaps I’m a bit to “cryptic” at times – and I apologize for that, but I just can’t stand the standard technical analysis – spouting out endless waves that never complete, Fib retracements that continually get breached, and technical indicators that have been proven “useless” time and time again. Look at them sure….but “live by them”? – No.
The fundamentals “do” still matter however masked / disguised they’ve been ( via our good friends at The Central Banks ) and the longer term time frames / macro trading still trumps “slugging it out in the trenches” day after day – during these unprecedented times of indecision.
As per the prior couple posts outlining the perceived “future movements in forex markets” – this “will” play out exactly as outlined.
I’m not placing any new trades here today….and likely “neither should you” but…..a quick recap:
JPY UP = Risk OFF
JPY UP = USD DOWN = U.S Equities DOWN
USD DOWN = EUR , GBP and CHF UP
RISK OFF = AUD, NZD, CAD DOWN
This is general ( yet invaluable ) information you can keep with you for the extent of your forex trading career, while keeping an open mind that “at times” a few of these may temporarily shift. These “times” are macro , MACRO MACRO, and are more so an indication of a “change in the investment environment” and not as much about the individual country / currency.
We will see this dynamic change WHEN INTEREST RATES BEGIN TO RISE, and we enter a time of monetary “contraction” as opposed to “expansion”.
The time is coming very soon, but until then – the “next trade” is either “more of the same” ( which by any analysis appears near impossible ) or the outline suggested above.
I say USD tanks and the majority of “predominantly American investors/bulls” get their asses handed to them by the very same banks / institutions that sold them the stock in the first place.
While I do agree that JPY will get a big move if/when there is another stock market sell off, I’m not necessarily on board with the FED Not wanting a stronger dollar when it comes to the YEN. Sure, a weak USD in “general”, but since we sell our fracked oil to Japan (I believe they are Not allowed to buy from Saudi Arabia, but instead are “forced” to buy ours), I think a weak Yen strong USD benefits the US a great deal right now.
As far as other countries are concerned, Korea for example, sure, they will put up a fight in order to stay “competitive” with Yen weakness.
With that said, any USD/JPY weakness has been a great buying opportunity for a while now and I think it continues for the next couple of years.
I was reading a rant against the FED on another blog the other day, but I pointed out there that the FED only inherits the economic situation and is forced to deal with it via the limited tools they are granted.
My take on the current economic state of affairs is that it is the result of (basically) corporate individuals – beginning a few decades ago – that were rewarded personally for figuring out their companies could improve their bottom lines by sending jobs overseas. They were right, and got promotions and bonuses for suggesting this.
Congress could have done something – tariff-wise – to ensure that US workers were forced to compete with foreign QUALITY, but not price. For whatever reason, they didn’t.
Next, it was the two-tiered wage system. I recently retired from Lockheed-Martin, a major defense contractor. They hire a lot of returning Iraq/Afghanistan vets, but don’t want to pay them but half the going wages for the jobs they do.
Unions looked the other way too, protecting their senior members bonuses and raises when they should have been promoting the preservation of jobs for future generations.
Had they stood for THAT, the public may have responded more sympathetically and people wouldn’t be wondering where the home-buyers went, now.
The middle class has simply lost it’s buying power. And that’s what the FED is supposed to be fixing.
All great points David, Dennis – French….as there is always “more than one way of looking at things”.
Who am I to disagree / argue – if not only to share an alternate view.
With so many working parts….so many variables…it’s simply impossible to “rubber stamp” it with one simple answer / blanket view.
The “inner workings” of The United States or any country for that matter – only a small piece when attempting to put together a “global puzzle”.
I try to step back as far as I can, and try to get the “broadest view” I can, and as it stands “these days at least” – Central Banking and the whole notion of creating and perpetuating a “debt based society” makes little sense to me.
Im my eyes its a complete and total “power grab” by those with the ability to “muscle over” those without, in a day and age where “humanity in general” seems to have lost it’s way.
The endless greed / desire for more, has “we humans” headed down a very difficult trail, and I have a hard time understanding how “piling debt on top of debt” does anything to help.
Unfortunately….it still just looks like “history repeating itself” as this cycle will likely play out just as the previous ones have.
That age ol saying – the rich just keep getting richer….blah blah blah…
Well, it seems to me that is just the natural progression of things in a debt-based society — made to leverage buying power and (subsequently) profits.
Everybody gains … at least initially, as wealth accelerates its flow through the system to the top few.
You are again contradicting yourself. If we enter a time of monetary contraction (iow tightening), then this is supportive for the dollar. This is basically what drives the dollar rally now, the expectation of the markets that sooner or later the FED will raise rates.
Also your premise that stocks will tank would suggest a stronger dollar (and of course a stronger yen) instead you foresee a dollar sell-off.
You don´t need to be a rocket scientist to figure this out, yet reading this blog you are on the wrong side of the market more often then not.
Stocks selling = lower dollar
You’ll have to re – read it.
When U.S interst rates rise ( and a fundamental shift in markets occurs ) this “might” ( and I say might ) drive a stronger USD although at that point…….stocks will tank even lower as a rise in interest rates will kill U.S multi nationals.
The Fed / U.S Gov can’t bare a strong USD.
You and I would need to get our timelines in sync in order for you to “see it the way I see it”.
cut and paste from the recent post: JPY UP = USD DOWN = U.S Equities DOWN
It’s reading…..not rocket science.
And then there was silence…..
Picking tops again and again remember last time you had your correction wow after couple of weeks on the wrong side guess what i bought the damm pullback again wonder when you will ever learn. Actually wanna see your real performance because year to date on your blog you had this year i think you just bullshiting yourself.
Don’t wanna be a ashole but you talk about smart money macro etc but actually i relly start to think you dont get it all or just talking like you are a smart guy but you the dump mone actually and just another retailer trying to look smart
Good for you James…tell us – I suppose you caught the entire move down from 2000 – 1820 ( as I did ) too right?
And I’m sure you’ll sell at the exact right moment too.
Then let me guess…you’ll switch short and get the next one too then?
Gimme a break…we all take our shots across the top, where most of the time “everybody” struggles.
Stick with your longs, and let me know how things look in a couple weeks.
http://www.zerohedge.com/news/2014-11-10/where-will-risk-erupt-time
I guess the last 6 paragraphs onward in above link makes the point which you are trying to press?
Starting from, “…But risk can’t be disappeared; it can only be transferred or temporarily cloaked. So where has all the risk pooled up in the system? In foreign exchange (FX) markets, that’s where….” Read on…
If you are a believer that Central Banks have somehow “magically solved” the continued deterioration of the global economy then great! Keep drinking kool-aid, keep buying etc….
All you need to do is take a look at a currency pair such as AUD/JPY back during the crash of 2007/ 2008 to see it clearly.
When it unwinds…it unwinds in such “tremendous fashion” that ALL believers are taken to the cleaners.
Central Bank policy can only go so far “kicking the can” further down the road….which only makes the inevitable “fall” all the greater when it finally comes to be.
I’m amazed that the general public “still won’t learn” ….now completely convinced that “nothing can possibly go wrong”.
It’s just plain “dumb”.
I agree with you Kong, I was just trying to highlight the last 6 paragraphs in the link I mentioned – think it’s trying to detail what you are trying to say re. the carry trade.
Aud and Nzd are two trades which I use as my risk on/off components and as I mentioned, both have fallen strongly since August/Sept yet this has not translated in to the equity markets (I think simply because you have too many Fed officials mentioning “QE4” every time stocks look like they will dive.
Exactly…..the CB’s are “past desperate” at this point, and continue to do everything in their power to keep “trust in the system” – while quietly out the back door ( as you’ve suggested – via AUD, NZD ) risk is already “selling off” everywhere.
The U.S and U.S Equities is “always” and I do mean “always” the last to go….as large market players will have already long since exited the markets.
Even just a quick look at $DAX The German DAX, as well $FTSE London as well the “Global Dow”: http://stockcharts.com/h-sc/ui?s=%24gdow
Already rolled over, with a consistant series of “daily” lower highs / lower lows etc….
This is Bear Market territory for these indexes already.
What are your thoughts on EUR/CHF and the approach of 1.2000 floor peg? It’s all linked to the Swiss referendum vote on Gold on Nov 30th. Some comments suggesting the media propaganda against such a policy already starting and vote will not go through but if it does, it becomes an immediate part of the Swiss constitution.
Because of the peg I’ve not considered trading EUR/CHF forever.
There is very little potencial reward, trading a currency pair that only moves in a couple hundred pip range.
Perhaps the gold vote will move it but….it’s a news event / risk scenario that I can’t be bothered with.
Same here in terms of not trading it but I was thinking more in terms of risk and gold price.
I recall Eur/CHF being at 1.1000 before the announcement of the peg so not much support if they decide to abandon the peg.
But what would be impact on Gold? A CB that is a forced buyer of gold? If CHF collapses against JPY, what impact does it have on ie. EUR/JPY?
Just read that if they do vote to repatriate their gold, it becomes part of the Swiss constitution immediately. Am just trying to work out how the big players will play this and position themselves up until 30 Nov which is only a few weeks away and how it will impact risk etc. Can’t imagine they will leave it until the last minute.
* “CHF collapses against JPY” Should read, “CHF soars against JPY” – assuming Swiss abandon peg.