Our Euro Comments: A Nasty Head‐Fake

On Tuesday, in Currency Currents, I got into some Elliot Wave Principle in order to discuss why the US dollar correction might have been over, opening the door for sharp appreciation.

Until yesterday afternoon my forecast was right on the money. The US dollar had rallied and even touched a new intra‐day high – 88.14 on the US dollar index – a point where the buck hasn’t traded in more than two and a half years.

Then we watched the euro, which had held up rather well this week compared to the rest of the majors, surge and reverse its losses from earlier in the week. The move was sharp and relatively large. And it led the majors in what was very much a widespread rally against the buck.

Published: 14 November 2008
Written by Editor
Forex  

Case against Euro vs. US$ still!

1) Still overvalued on a Purchasing Power Parity basis against the dollar
Interest rate differential to shrink as ECB catches up to the Fed
3) Safe haven money flow i.e. risk aversion still favoring the buck
4) Shift in oil equation i.e. reallocation no longer favoring euro
5) 7-year global dollar short position likely not reversed in five months
6) Emerging market chaos reverberating back into European banking system given Euro-banking huge exposure there.

Published: 13 November 2008
Written by Editor
Forex  

von Mises doesn’t think much of ZIRP!

Commenting on Bank of England Governor Kings recent utterances, Bloomberg shared
this story today:

Nov. 12 (Bloomberg) ``We are certainly prepared to cut bank rate if that proves to be necessary'' to hit the central bank's 2 percent inflation target, said King at a press conference in London. He indicated the central bank would be prepared to push its benchmark to zero if necessary.

Published: 12 November 2008
Written by Editor
Forex  

Defining the Correction, and Finding Its End!

Jack’s been running around speaking at various currency tours and seminars this year. And there’s one line he likes to use when conveying the uncertainty of trading in any market ...

“It’s better to be lucky than good.”

In other words, when we’re trading our money and effectively have our clients’ money on the line, we’ll take lucky any day if it means we, and our members, are making money. Being ‘good’ doesn’t always equate to success in a market environment.

Published: 11 November 2008
Written by Editor
Forex  

China to the rescue—maybe! And ChartView

China’s new fiscal stimulus package is receiving rave reviews across the board this morning. Bond prices lower, stocks higher, oil higher, gold higher and the dollar getting whacked—it’s déjà vu all over again for the risk appetite crowd.

Should we rejoice and jump back in to everything once bubble-icious? Or does China’s action represent a sign of real fear and desperation as it watches its export demand crumble around its export-centric world view?

Why should China’s stimulus package prove any more effective than those conjured up by the smart boys in Washington?

Published: 10 November 2008
Written by Editor
Forex  
  1. Currency Currents - Thursday 6 November 2008
  2. Currency Currents - Wednesday 5 November 2008
  3. Currency Currents - Tuesday 4 November 2008
  4. Currency Currents - Monday 3 November 2008
  5. Currency Currents - Friday 31 October 2008