ONE-TWENTY TWO: Trading Financial Markets
Exploring the poetry in financial markets for students of money and economy since the year 2000.
INTRODUCTION When I first picked up “Making Sense of the Dollar: Exposing Dangerous Myths about Trade and Foreign Exchange” by Marc Chandler, I thought it would unlock dark secrets explaining how and why the dollar has generally declined for the past ten years. I was disappointed to discover that Chandler is actually extremely bullish on … Read more
The Royal Bank of Australia (RBA) surprised markets by leaving rates unchanged at 3.75%. Forecasts pegged the RBA for another 25 basis point increase. The markets reacted with an instant and steep drop in the Australian dollar against all major currencies. For example, the Australian dollar dropped over 1% against the U.S. dollar. (See chart … Read more
The U.S. dollar index is only trading back to levels from last summer. However, from a technical standpoint, the dollar has broken out: the short-term downtrend has ended, and the current move has considerable upside potential. *Chart created using TeleChart: The chart above shows that the dollar’s break below the 200DMA in May led to … Read more
I did not think I would consider (this soon) whether the dollar’s short-term downtrend is ending. I thought this month’s unemployment report put an end to the dollar’s relief rally, but the dollar has surged in the past 3 days to recover all its losses since the most recent peak in mid-December. Even the Australian … Read more
The dollar’s recent relief rally stalled out December 23 (see chart below), and December’s disappointing jobs report may have officially ended it. The apparent working thesis supporting the dollar’s relief rally has been an expectation that an imminent recovery in the labor market would motivate the Fed to raise interest rates sometime soon. December’s disappointing … Read more
(Repost from January 7, 2010) Naoto Kan, Japan’s new Finance Minister, took office today and promptly requested that currency traders sell the yen. This stance further supports September’s backtracking from an implicit stronger yen policy earlier suggested by out-going Finance Minister, Hirohisa Fujii. Japan has now officially returned to the de facto competitive devaluation that … Read more
As the U.S. dollar index has steadily advanced this month, the relative strength of the Canadian dollar has perplexed me. The Canadian dollar has long seemed overplayed to me as a commodity-positive play given the country’s heavy dependence on the health of the U.S. economy – which I continue to assume will perform weakly in … Read more
By now, everyone has noticed that the inverse relationship between the stock market and the U.S. dollar has broken. For December, the U.S. dollar index is up a healthy 4.7% while the S&P 500 is up 2.1%. I created two charts to demonstrate the dramatic nature of the change relative to trading before December. The … Read more
The Bank of England (BoE) released its “Inflation Report” on November 11, 2009. This was my first time ever reviewing the report and watching BoE Governor Mervyn King in action as he coolly parried with reporters during the press conference covering the report. The latest Inflation Report frequently references the benefits of the depreciation of … Read more
Yesterday, the Bank of England left its interest rate at 0.50% and increased its program of quantitative easing by £25 billion to a total of £200 billion. The British pound immediately rallied on the news against all major currencies – apparently, analysts already expected the increase and were afraid the BoE might actually increase quantitative … Read more