Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gauging the Turn in Dollar, Gold & Crude Oil

Commodities / Financial Markets 2009 Mar 20, 2009 - 12:48 PM GMT

By: Ashraf_Laidi

Commodities Best Financial Markets Analysis ArticleThe FOMC announcement of March 18, December 16 and September 16 each produced an interventionist surprise at the expense of the dollar. But unlike in the announcements of Sep 16 (AIG bailout) and Dec 16 (Fed's surprising zero interest rate announcement), Wednesday's announcement to buy long term treasuries and expand the purchase of MBS and Agency securities may continue to extend the dollar's retreat, beyond just a few days.


My warning for a turn in the dollar emerged shortly after the dollar index failed to break above 89.62 (euro equivalent low at $1.2455), which was a trend line resistance prevailing since the February 2002 high (peak of USD bull market).



So why is it different this time?

1. The Eastern/Central European story haunting the euro was clearly a negative theme for the currency, but such a story would only prove detrimental for the euro in the event of a bankruptcy/implosion of these banks. Absent those events, those fears were confined to grading watch from credit rating agencies, thereby, not justifying prolonged selling in the euro towards the October lows.

2. It is not enough to make the case for the dollar simply based on the premise that the Feds aggressiveness renders the US economy most likely to recover the soonest. The fact that US credit market strains and ongoing macroeconomic spill-over show no signs of abating, justifies that intensity of the US central bank measures as they reflect the critical situation of US markets/economy. Also, recall that part of the Feds liquidity measures have been aimed at shoring up liquidity for foreign central banks.

3. Technically, the ensuing positive correlation between the USD and global equities suggests an acceleration of the dollar sell-off as equities extend their recovery (albeit still deemed a bear market bounce). Indices would have to rally by more than 27%-28% from this months lows to 845-855 in the S&P500, 4,460-4,500 in the FTSE-100, 4,680-4,700 in the Dax-30 and 9,000-9,100 in the Nikkei-225.

These are some of the factors most likely to make yesterdays major Fed action different from the previous two by extending USD weakness (commodity strength) beyond just 2-3 days, and into mid end of April-Mid May. These conditions are especially facilitated by oils' break to 2-mth highs above the 100-day MA for the first time since August and a rally in resource metals (copper at 4-month highs).

What About Gold?

Golds uptrend was bolstered by its ability to hold above the bottom of the 4-month channel pf $880, its ability to limit periodic declines to no more than 10-11%, as well as holding above its 50-day MA. These technical criteria were first brought up on March 6 th . Having passed all these tests, I re-iterate the near term target of $1,050.

By Ashraf Laidi
AshrafLaidi.com

Ashraf Laidi is the Chief FX Analyst at CMC Markets NA. This publication is intended to be used for information purposes only and does not constitute investment advice. CMC Markets (US) LLC is registered as a Futures Commission Merchant with the Commodity Futures Trading Commission and is a member of the National Futures Association.

Ashraf Laidi Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in