Market Mood Swings Toward An End to the U.S. Dollar’s Latest Rally

(This is an excerpt from an article I originally published on Seeking Alpha on July 11, 2013. Click here to read the entire piece.)

Ordinarily, I would have called Wednesday’s (July 10, 2013) close on the S&P 500 (SPY) a stalemate that potentially signals a reversal in fortunes for the index. The flat close occurred right at resistance from the June highs.


A stalemate between bears and bulls at resistance from the June highs
A stalemate between bears and bulls at resistance from the June highs

The news cycle rules right now. This earnings season promises to be full of market mood swings if the reaction to the Federal Reserve minutes for June’s monetary policy meeting and Chairman Ben Bernanke’s Q&A session following a speech are any indication. The stalemate in the S&P 500 during U.S. market hours occurred as the market dipped ahead of the release of the minutes of the last Federal Reserve meeting on monetary policy, spiked up in trigger-finger response to the release, and then calmed back down to settle at flatline. Overall, the minutes contained no new information. What Bernanke said during the Q&A of a speech later in the day apparently tipped the balance. {snip}

Bernanke’s response was an implicit reference to the labor market’s poor participation rate and likely also an implicit reference to persistent underemployment in the economy. {snip}


The dollar index falls back from three-year highs and retests the QE2 reference price
The dollar index falls back from three-year highs and retests the QE2 reference price

{snip}


The British pound soars 1.9% off its bottom versus the U.S. dollar
The British pound soars 1.9% off its bottom versus the U.S. dollar

The euro practically goes "parabolic" intraday versus the U.S. dollar
The euro practically goes “parabolic” intraday versus the U.S. dollar

{snip}


USD/CAD goes from strength to weakness in a heartbeat
USD/CAD goes from strength to weakness in a heartbeat

{snip}


Wide churn in USD/JPY since the Bank of Japan's QQE
Wide churn in USD/JPY since the Bank of Japan’s QQE

{snip}


Just a relief rally for the Australian dollar?
Just a relief rally for the Australian dollar?

Source for charts: FreeStockCharts.com

While it seems the accumulated sharp reversals in U.S. dollar currency pairs signals an end to its rally, I do not think this next equates to a sustained sell-off in the U.S. dollar…even against the British pound. {snip}

Be careful out there!

(This is an excerpt from an article I originally published on Seeking Alpha on July 11, 2013. Click here to read the entire piece.)

Full disclosure: long EEM put spread, short Australian dollar, short euro, long British pound, short Canadian dollar

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