The dollar, the pound, the US market (LatAm is boring this morning)

I'm glad Gary BiiWii turned his attention to the USD this morning and posted this chart.....

click to enlarge

.....on his public blog, cos it means I can swipe it, put it up here, link to him and get a better class of chart on the subject here with little sweat. The other forex matter that has torn me away from LatAm this morning is the state of the British Pound (GBP) in the wake of the UK General Election, the hung parliament and the serious, highest-level-possible horse trading that's going on right now.

That downspike to under 1.45/1 happened when Gordon Brown reached out to the now kingmaker Nick Clegg and offered him "far reaching reforms" (i.e. proportional representation is now on the table) if he'd come play alliances and let him keep his job. Meanwhile the Conservatives are pretty close themselves and might even manage to form a minority government. What the market wants, more than one-or-the-other-side winning out, is a quick resolution to the horse trading. That might be more complicated than it sounds and hence the drop in the GBP. Certainly the funnest currency to play in the next few days.

Add in the FunkyMonk rollercoaster ride at the NYSE and it's one helluva day to be tuned into the markets....especially when you never work on margin :-)

Gold the safe haven?

Today's lesson: When big money wants to run and hide, it does not run to gold:

It runs to the US Dollar. This time is NOT different.
Any other stories spun by idiot goldbugs are simple fantasy. Live with it, stop wingeing about the PTB conspiracy that's used against you personally and take some advice from Chopper:



Here endeth the lesson.

The US dollar and gold (and how they may be related)

Look carefully and you might be able to spot a pattern :-)

But it's perhaps more interesting to look at the weekly candles of the USD and Gold futures next to each other.

Three thoughts that spring to mind:

1) Since that December peak, gold has dropped from $1,180/oz (excluding the spike up) to the current $1,087/oz and the dollar has risen from 74.8 (excluding the spike down) to 80.5. In percentage terms, gold is down 7.88% and the dollar index is up 7.62%.

2) People actually bother to track the supply and demand stats for gold? Are they mad? They need to get out more, or find some other dataset to follow, or work for charity instead. Gold is inverse dollar, dollar is inverse gold, the rest is noise. Gold is not affected by the wider commodities market forces for a very simple reason; it's not a commodity, it's an asset class.

3) The dollar is still daddy and all things, gold included as just one example, revolve around it like planets around the greater sun. It may be a basic statement but it's worth saying and like it or not, you're silly to ignore reality.

The whole ballgame in one chart

The US Dollar index chart on thirty minute candles.

If you're not watching the dollar today it means you have no interest in stock markets (which is probably quite a healthy attitude to life, really).

The US Dollar

So buy yourself your own favourite miner while the sale is on.

Charting the US Dollar rally

Otto pretends to be interested in technical analysis due to a request from reader 'TB' who wants a thought or two about today's US dollar rally. This 30 minute candle of the December USD futures contract shows it nicely:

But by continuing my chartist pseudolurve, this daily candle says that what we have isn't a game-changer yet.

Personally, I'm more interested in the way miners reporting in Loonies or Pesos or whatevers will get a benefit from a strong dollar compared to their home currency. But hey...that kind of thinking is far too logical for this market.

Macro Man on the dollar

I always enjoy reading people who are smarter than me. One of my fave bigpicture econ bloggers, Macro Man muses on the myth of the strong dollar today. Well worth clicking through and reading this one as he fits plenty of pieces of the puzzle into one concise post.

Link here

Meanwhile, here's the USD index as printed three minutes ago (hourly candles) to fill up space and make this post look pretty. Whither goest thou, greenback?

The US Dollar: Some smarts from Trend&Value

After musing on the USD for a couple of weeks in the intro section of The IKN Weekly, your humble correspondent came to the definitive conclusion that he doesn't have a freakin' clue about the technical analysis aspects of the greenback right now.

But fortunately, help is at hand! Somebody much smarter in the ways of the chart is Lucas over at Trend&Value and on reading my laments he sent me a chart and a comment or two this morning that I thought was pretty intelligent. I've been given permission to reproduce here, so let's hand it over to Lucas.

Just read your last weekly.

Regarding the Dollar, it seems to me that we have all been regarding particular price levels as overly important in terms of key supports (and I have been more guilty as most in this). It has been my contention that the last couple years will be looked back upon as a major bottom for the Dollar. Time will tell. But, if you look back to major historical turns in the currency markets, you find that the bottoming process takes a good deal of time, and back and forth trading, before a truly directional trend develops.

As for the recent action, the continued slippage has been a frustration, to be sure, but the daily chart of UUP (attached) shows a potentially very bullish 'declining wedge' formation. Additionally several of the technical indicators are looking rather positive. (RSI divergence on the top panel, CMF divergence on the first bottom panel -- this indicates accumulation).

A retest of 72 on the index is not out of the question, but my feeling is that the next major surprise will be to the upside.

Quiztime! Which South American currency has strengthened by 29.3% against the dollar since August?

Here's a clue.

Watching dumbasses make fools of themselves over all things LatAm financial is my guilty pleasure, of course, but it comes triplesweet to read the stupidity written about the VEF in the last few weeks.

Stick to your myopic mumblings on inflation next time.

The US dollar index chart: the fight to hold 76

It's the whole waxball right now. Make sure it's front'n'centre on your trading screen, too.

The USD got as low as 75.76 this morning (I think) but has crawled back over 76 again. The above chart is the December futures variety, 15 min bars, cos it's a better way of gauging (the futs run more volume).

Will 76 hold? Will the greenback laugh in the face of its naysayers and refuse to die? Will it snap down to the next clear resistance point of 72? Time will tell.........

The US dollar index weekly chart

This is the only one that matters, as right now the rest of the financial and trading world is revolving around the greenbacks travails even more closely than it usually does.

Click to enlarge

Otto sez: I expect the USD to bounce off the current levels and move back up through 78. Time will tell whether that call is yet another OttoFail™. DYODD, dude.

The dollar's bottom is in! Proof here!

Contarian indicator of the day (perhaps even the year) is brought to you by Reuters as it reports the following (Spanish language link):

Peru's Central Bank said Wednesday that it had decided to reduce US dollar participation in the composition of its international reserves from 80% to 62%, due to fears of volatility in the US currency caused by the global financila crisis. Continues here

Or in other words, when the dumbasses in suits bail on the dollar the bottom must be in. Short the Euro now!

Peru's Nuevo Sol (PEN) currency weakens sharply

On the back of the 1+% drop in the Nuevo Sol (PEN), the currency dropped another 1.5% today. The move is being explained by "strong demand from local banks to cover short dollar positions".

Or in other words, the dumbasses in suits in Peru actually started to believe the hype that FinMin Carranza has been dishing out recently. In the end, money talks and BS walks and the move charted out above isn't some orderly downward move conducted by the Central Bank. It's semi-panic as people with money run for cover. Joe Public will find out the truth once the money dudes have covered their tushes. DYODD.

Chart of the day is............

...the Venezuelan Bolivar Fuerte / US Dollar parallel rate.

This chart by popular demand. Ask and shall thee receive, that's wot I sez.

Charts of the day are...........

.........the three year US dollar chart and the three year dollar:gold ratio chart

(click to enlarge)

Looking at these charts it occurs to me that all the gold buying and supply shortage talked about in goldbugland really has made a difference....

(click to enlarge)

....it's stopped gold from revisiting $600/oz (the price in October 2006).

Now accepting bets

Feeling lucky punk?

My U$100 bill says that Venezuela will not devalue its currency from the official VEF 2.15 to the US dollar in 2008. The bet is at even money (i.e. you match my U$100 with your U$100) and can be settled by bank transfer, PayPal or Western Union wire on the first working day of 2009.

Any takers?

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Venezuela Bolivar Sinks to 10-Month Low on Devaluation Concerns

Oct. 23 (Bloomberg) -- Venezuela's bolivar fell to a 10- month low in the parallel, unregulated market as a collapse in oil, the country's biggest export, fueled speculation the government will devalue the currency yada yada continues here

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Meanwhile, here's a message for (at least) seven readers I know that live in Venezuela and are fortunate enough to get their salaries in US dollars; tomorrow's the day, people....get yourself some of those cheap VEFs.

The Dollar: the USD index chart

click to enlarge

Forget oil. Forget precious metals and base metals. Forget every single conspiracy theory from the tin foil hatters.

The US dollar is the whole ballgame right now, and this chart says that the dollar is about to take a well-deserved break. The moves in everything else will march to the drum of the dollar, and let's go on record here: I fully expect the dollar to reverse and weaken off this (approx 80) high and allow copper, silver, gold and the rest to rally.