dollar index

Done Deal – The U.S Is Now China

Forex Kong 17 Comments

The plans/suggestions emerging from the weekend’s meetings in China are staggering!!

Ok ok….a little dramatic and perhaps overstated but get this…..

As part of an evolving proposal Beijing has been developing quietly since 2009 to convert more than $1 trillion of U.S debt it owns into equity, China would own U.S. businesses, U.S. infrastructure and U.S. high-value land, all with a U.S. government guarantee against loss!

The Obama administration, under the plan, would grant a financial guarantee as an inducement for China to convert U.S. debt into Chinese direct equity investment. China would take ownership of successful U.S. corporations, potentially profitable infrastructure projects and high-value U.S. real estate.

These points have been discussed for several years now so it’s really not anything new ( although I’m sure it’s the first you’ve heard of it ) but the message is very clear.

China will not tolerate / watch their dollar denominated assets ( treasury bonds ) go up in smoke via currency crisis and crash of the U.S dollar – BUT WILL ACCEPT HAVING THIS DEBT TURNED INTO DIRECT INVESTMENT IN OWNERSHIP OF U.S BUSINESSES AND LAND.

GOVERNMENT GUARANTEED!

Brilliant…..absolutely brilliant.

 

USD Strength – Gold, Stocks, Forex Direction

Forex Kong 15 Comments

The strength of the US Dollar has gathered steam over the past few days, with several trades “long USD” already paying well. I don’t imagine this to be your average “run of the mill” type move here – so I feel it worthy of further discussion / analysis.

The US Dollar will most certainly be moving lower in the “not so distant future”, but we trade what we’ve got in front of us so……

Forex_Kong_USD_Moving_Higher

Forex_Kong_USD_Moving_Higher

In looking to line up these “technicals” with some broader “intermarket analysis” we’ve got to consider that U.S equities have made some pretty huge gains since January of this year , as USD has more or less gone “up the mountain and back down the other side” – now at exactly the same level around 79.00.

With an impending correction “upward” in USD it would make sense to “finally see equities correct lower” ( if that’s at all possible considering the Fed’s POMO) and unfortunately for many – see gold and the precious metals correct lower as well.

Looking at forex markets it’s obvious the “opposite reaction” of a much stronger US Dollar will equate to a weaker EUR as well GBP and CHF. I would also expect the commodity currencies to correct lower as well, but considering that they’ve already fallen considerably – my focus would be on the Euro type pairs.

So that’s what I’m running with over the next few days – looking to “inch in” to many trades with a “risk off” vibe, and continued strength in the dreaded U.S Dollar.

Day Of The Dead – One Year Blog Anniversary

Forex Kong 18 Comments

Well – what can be said?

It looks as though I’ll have no trouble “celebtrating in style” here today and through the “Day of the Dead” celebrations set to kick off here in Playa over the coming days  – as we nailed the upside turn on USD literally to the minute. That, coupled with the incredible moves in AUD overnight ( I sent out the tweet, and even put a post together as fast as I could!) has me up an additional 3% and “holding” here as of this morning.

As well the “offical” 1 year anniversary at Forex Kong!

Day of the Dead (Spanish: Día de Muertos) is a Mexican holiday celebrated throughout Mexico and around the world in other cultures. The holiday focuses on gatherings of family and friends to pray for and remember friends and family members who have died. It is particularly celebrated in Mexico.

Day_Of_The_Dead

Day_Of_The_Dead

It’s Halloween on an entirely different level, lasting nearly 3 full days (and even gets an official bank holiday). The costumes, art work and cultural festivities are second to none. I encourage all of you to Google it / have a look online.

So, that’s about it for this morning short of keeping our eyes on reaction across other asset classes as the USD digs in here, and looks to wipe out a serious number of players “still” sitting on the other side.

U.S Debt Downgraded By Chinese

Forex Kong 19 Comments

Finally we get a solid move on the fundamentals, as last nights downgrade of U.S debt from Chinese ratings agency “Dagong” sent the U.S Dollar spiralling down.

Now Dagong is no “Moody’s or Fitch” ( currently rating on “negative watch” ) but this in itself brings about a very interesting point.

A Chinese ratings agency having such a significant impact on the dollar? Wow.

You might expect this kind of move given that a “reputable” agency in the U.S gave the “thumbs down” on the debt ceiling debacle sure…but a Chinese ratings agency?

As the largest holder of U.S Debt / Treasury Securities on the planet it is now painfully clear how much influence China truly has. The agency suggested that, while a default has been averted by a last-minute agreement in Congress, the fundamental situation of debt growth outpacing fiscal income and GDP remains unchanged. “Hence the government is still approaching the verge of default crisis, a situation that cannot be substantially alleviated in the foreseeable future”.

Kicking the can a couple of months further down the road makes little difference when the U.S will just be back in the news then…..still unable to pay its bills.

The short USD trades obviously made big moves here overnight, but not exactly as expected. Great gains in EUR, GBP as well CHF but oddly the “commodity currencies” have shot higher. An interesting dynamic and certainly one to keep an eye on as NZD as well AUD approach overbought levels.

Gold up a wopping 34 bucks here this morning, so perhaps we’ve got the “risk off” flows on the move.

Forex Positions Update – USD Weak

Forex Kong 2 Comments

Short USD Trades – October 14 – 17th?

As per my posted “trade ideas” Friday, a couple of the “short USD” ideas have taken shape. In fact nearly everything is moving in said direction short of the pesky NZD. This damn currency has been bobbing around / consolidating for nearly a month and has proven to be a real stubborn pain in the ass.

https://forexkong.com/2013/10/11/my-trade-ideas-october-11-14-2013/

For the most part USD weakness “again” appears to be the move , although at this point nearly every single chart ( looking at nearly any time frame) could almost / just as easily go the other way.

The U.S Dollar is undoubtedly the “tough nut to crack” here, and “with it goes” the rest of it so…..

Here we sit. On the fence again.Kinda.

With risk events such as the U.S Gov Debacle only days away, it makes perfect sense that currency markets aren’t moving too much, as it also remains to be seen where equities, bonds and gold will find their direction.

I like where I’m positioned here but again, am trading with 1/2 to 2/3  smaller position size than when “out on the highway” so we keep things small while we come around the corners.

The Big Story Last Week – You Missed It

Forex Kong 9 Comments

Unlikely to have been mentioned on your local T.V last week, the “real big deal”  had little to do with the “circus in Washington” as, quietly behind the scenes The European Central Bank (ECB) and The Peoples Bank Of China (PBC) signed China’s second largest “currency swap agreement” for a wopping 350 billion Chinese Yuan.

In an unpresedented move The European Central Bank said: “The swap arrangement has been established in the context of rapidly growing bilateral trade and investment between the euro area and China, as well as the need to ensure the stability of financial markets.”

In doing so, the parties involved avoid swings in exchange rates. They can also be considerably less reliant on the U.S Dollar for bilateral trade and business deals.

China’s central bank has now signed currency swap deals amounting to some 2.2 trillion yuan with 22 countries and regions, with its continued efforts to internationalize the Yuan and rival the U.S Dollar as the world’s reserve currency.

What do “I” think this deal suggests with respect to the long-term future sustainability of USD, now with Janet Yellen a “shoe in” for continued money printing? Continued money printing???

What do “you think” I think?

Wow. Now EU Zone looking for options moving forward.

Safe Haven Trade – USD Or Gold?

Forex Kong 5 Comments

Something important came up in the comments area last night, and I thought it worth pointing out.

When we consider the impact of a “flight to safety” ie…….a move in markets where “true fear” pushes investors to dump risky assets ( and to literally….seek safety ) it’s impossible not to consider the U.S Dollar as being “top of the list” as the place to run and hide.

Now, this may seem “counter – intuitive” considering the recent ( and ongoing ) blunders within the Unites States but – that’s not even the point. Take a look at the chart below and note the total % of global currency trading for the top 10 most widely traded currencies in 2013.

Trade_Currencies_Global_Forex_Kong

Trade_Currencies_Global_Forex_Kong

That’s 87% of transactions to include the U.S Dollar, compared to a piddly 33.4% for Euro and only 23% in JPY rounding out the top 3.

As a simple matter of “default” when risk comes off and investors get scared – there is absolutely no question that USD will take massive in flows, as risk is unwound and risky assets and investments in emerging markets are converted “back” to USD.

Now, we’ve still not seen a “true flight to safety” as global markets have so embraced the never-ending flow of “free money” coming out of both the U.S as well Japan – with the general investment climate being one of accommodation. This can’t last forever.

You’ll recall I had envisioned a time where “all things U.S would be sold” and to a certain degree I see that this has already happened. Starting with bonds ( as suggested ) then the currency, and lastly ( alllllways lastly ) stocks now starting to show their “true value”.

I’m not concerned with much further “downside” in USD at this point, as one has to keep a couple other “macro” things in mind.

How long do you think the Chinese and Japanese holders of American debt are looking to stand around and watch their U.S denominated assets decrease in value? How far do you “really” think that Ben and the printing presses can push before somebody “really” pushes back?

Food for thought no?

Forex Turning Point – Today Is The Day

Forex Kong 12 Comments

Ok “mother market”…..I’m gonna give you exactly 24 hours before you’ve got a major decision to make.

I know, I know , I know…….you are the boss – and I’m just a boy trying to make a buck but seriously…you’ve gone a bit too far this time and I’m close to running out of patience.

This “pesky little thing” you call “the dollar” has just about done enough to frustrate me and my friends to the degree that we will soon be pulling out our hair – short of you making up your mind.

Are you going to let this thing get away on you? Or are you going to do “stick to the plan” and toast it like a marshmallow?

Yes , yes I understand – you can’t just make these decisions on the turn of a dime, so let’s do this……

If USD doesn’t poke its head back under 82.23 and turn red (really red) mighty quick…..then we’ll just let you have your way,  and start to consider the opposing view.

I will look to get “bullish USD” should you decide to make such a mistake right  here…right now.

Personally, I feel it’s a tad early – but if this is what you want…..so be it.

24 hours – and I won’t bother you again.

Eyes On U.S Unemployment Data At 8:30 A.M

Forex Kong 12 Comments

This morning’s unemployment data out of the U.S is always a real show stopper. Traders from around the globe sit patiently huddled around their stations waiting……..waiting.

Waiting to hear how many 100’s of thousands of Americans have filed for unemployment insurance for the first time during the past week. Will it be more than the 329,000 projected new unemployment claims? How much more? Ooooooooh! Will it be less than the 329,000 American citizens projected to have filed for unemployment insurance just last week? Last week? In just a single week? Are you kidding me?

What possible difference could it make if the number was even 20k more than projected? or 20k less in a single week, when we are talking about 100’s of thousands of NEW CLAIMS!

No question that the endless printing on money has equated to “spurred job growth” eh?

Ridiculous.

I’ll wait for the numbers to consider adding to my current ´positions “short USD” or take a decent one on the chin “if” USD takes off higher here. It’s getting closer and closer to the time ( Sept) I had originally considered looking “Long USD” so I’m careful here.

I feel it’s still too early for Ben to just let this thing get out of control and see USD skyrocket so I’m going to sit tight another round here and see how this plays out.

 

USD Set For Short Term Move – Higher

Forex Kong 6 Comments

The USD is long overdue for a counter trend move higher, which is likely to start – literally this minute.

As usual ” they never make this easy” as “of course” you’ve got FOMC / Bernanke talking AGAIN here early this week.

At times I do marvel at the manipulation as even just this morning I’ve read a couple of headlines where “The IMF ( International Monetary Fund) Suggests Tapering A Bad Idea” coupled with usual market chatter leaking out (via U.S Media) that “Tapering To Start As Early As Sept”.

It’s pretty impossible for the IMF and the U.S Federal Reserve to even have opposing views – as the  IMF’s largest contributing and “influential” member country / representative IS the U.S and Ben Bernanke so……here we see it again – complete and total nonsense keeping things as confusing as possible.

Any move higher in USD will likely be fast n furious ( as to wipe out short termers ) and likely short-lived so I would advise caution here. Catching a counter trend move is always risky, and it’s clear that USD is in a well-defined downtrend.

I’m playing it across the board, as well remaining LONG JPY as these trades are well in profit now.