We’re still getting mixed signals as a consolidation moves continue. But it looks as though some of the currencies are building up steam; the likely resolution (on technical analysis alone) being a sharp breakout in accordance with the trend prior to consolidation. In other words, up versus the US dollar.
We’ll start with the British pound, which has made an almost unfathomable run in the previous four months.
The mantra from most commodities guys is a simple: Be long or be wrong. This is a secular bull market in commodities. And up until that little upset recently, a 50% haircut triggered by the credit crunch, commodity bulls have been right on the money. The recent 50% retracement (or swift rally depending on one’s perspective) of the 50% decline makes the bulls rightfully proud. “There’s money in dem-darn hills boy! And this is only a mid-cycle correction.”
China knows its symbiotic relationship with the US is over. You remember the one; it was based on US buying likely drunken sailors and China sending its sailors over to drop off container cartons of stuff, fill them with US paper, and ship them back to China, which many were shipped back to help keep this game alive. If you don’t remember, below is a pictorial of this relationship that we put together a while back:
Wondering why the South African rand rallied sharply against the buck yesterday? Me too.
Leading into and following the Federal Reserve announcement yesterday, the dollar was stronger versus the pack of majors. So what prompted such strength from the rand?
Scan the recent headlines and find they point toward ongoing weakness for Africa’s largest economy. To be sure, nothing fundamental was the driver behind the rand’s move yesterday.
We were expecting at least one day of follow-through (actually more) on the green shoot to brown weed re-think, thinking it would benefit the dollar as it did on Monday, but no dice. It seems all attention is back on the Fed and quantitative ease and signs of recovery—QE and recovery both synonymous in traders’ minds to sell the greenback.
