Viewing entries tagged with 'GDP'
How strong is the USD ? Is the strength likely to last?
These two questions obviously go to the heart of matters at the moment and if the answer can be found then we can potentially unlock great profits.
After years of being shunned it appears that the U.S. is once again a preferred destination of investment. Since the start of the century, and accelerated by the onset of the GFC, investment funds flew out of the U.S. and headed for emerging markets. Such was the magnitude of the drive to exit ‘old’ for ‘emerging’ that a new term was coined. The rise of the BRIC’s (Brazil, Russia, India and China) was on everyone’s radar ……largely at the expense of the U.S.
However the U.S. has always been an early mover and we must admire them for the significant policy responses that were implemented in the wake of the GFC (compared to say the Japanese after their stock market collapse in 1989 which even until today was never adequately dealt with). These actions appear to now be bearing fruit just at a time when the BRIC’s, particularly China are slowing a touch.
Thus the massive flow of funds from old to new now looks to be slowing or even reversing.
Looking at the DXY chart this theme is strongly borne out.
The monthly chart of the USD Index is particularly revealing. Firstly there appears to be a long term ‘rounding bottom’ formation of some 10 years in the making. And significantly we are on the cusp of 2 bullish engulfing months within the last 4. To me that speaks volumes to the amount of USD buying presently going on. If history generally repeats, then the implications of a close to the month for the USD at these levels, implies multiple months of further USD gains.
The USD Index can be traded via the standard Futures contract or a CFD, both available on your BBY Online platforms. Or you may wish to simply spread USD risk through some of our old favourites in currency land, AUD, NZD, EUR, GBP and JPY. Indeed CHF could be added to this mix as a number of high profile analysts are calling for some serious weakness in CHF going forward, which makes Thursday evenings GDP release for Switzerland a must watch event (6.45pm NZT).
In the wake of the FED’s FOMC announcement this morning these charts bear close scrutiny.
The FED have pledged to keep the money spigots wide open, to pay for their US$85 bio per month of various securities purchases, until the labour market improves to 6.5% unemployed goal. i.e. the song remains the same.
We know that the majority of data from around the world, last night’s U.S. GDP excepted, has been strongly on the improve lately so is Dr. Copper (recall Gartman says it has a PHD in economics), ready to break higher just as the USD Index drops below support?
With the EUR/USD rampaging higher, Gold and Silver again looking strong I suspect these support/resistance areas will be broken in due course and create very tradable moves.
Simple thesis here.
1) The world’s economic growth is clearly slowing as evidenced by the last 12 months manufacturing index results.
Just look at the trend of the GDP forecasts below…simply a constant series of downgrades.
2) Supply increasing – This little titbit from The Gartman Letter showing how over time market prices dictate outcomes. That is, the old adage that “the cure for high prices is high prices” in as much as high prices ultimately stimulate increased production which in turn brings down prices.
Looking directly at the Crude chart there is the suggestion that Crude prices are beginning to roll over from the classic Fibo retracement of 61.8% of the last down move.
Putting all of the above together the suggestion would be that slowing global demand combined with increased global production has the potential to send crude prices much lower.