Forex Market Commentary
US equities markets are not happy at all. The strength of the US Dollar is taking it's toll as can be seen in the disparate directions of US manufacturing and non-manufacturing data. The USA is not a service nation of insurers and bankers; it is a nation of industrial giants like General Electric, Ford, Chevron and Exxon Mobil that thrive on a lower US Dollar. Moreover tech companies like Apple Inc and retail food companies like McDonald's have a huge exposure to international sources of income where the higher Dollar hurts internationally derived revenues. The Dow closed down 120 points at 17419.75 whislt the Shanghai SSE consolidates itself at the 3,737.56. EuroSTOXX50 was down 19 points to 3661.00.
The Dow Bull market is certainly near its close if we are to see the US Dollar increase a further 5% with USDX smashing through the 100 mark and consolidating above it's April high'
On Bloomberg US equties are in trouble please read -
http://www.bloomberg.com/news/articles/2015-08-06/media-wipeout-taking-down-pillar-of-bull-market-in-u-s-stocks
Bloomberg warns today that the pace of US hiring is about to slow down in the face of the strengthening Dollar. Read here -
http://www.bloomberg.com/news/articles/2015-08-06/american-employers-are-about-to-slow-hiring-and-that-s-ok
At 5.3% unemployment rate the US economy is more or less near the Fed target of 5% full employment. But in a world where crude oil prices are falling and the world's second biggest economy China is starting to slow down, US policy makers need to toe a fine line on the timing of any official rate hike, because with falling crude oil prices comes a diminishing threat of imported inflation.Moreover strengthening Dollar hurting US exports is going to affect the labor market sooner than later. But the problem is with China where 7% GDP growth annualized is political suicide. With several trillion US Dollars value in currency reserves the Chinese government is now pressed for options to stimulate growth and the traditional recourse is it's own currency devaluation to stimulate Chinese manufacturing to export its way out of trouble and thereby increase economic growth. Thus even with slowing US GDP data the Fed's hands may yet be tied by factors beyond their control as Chinese authorities increase purchases of Treasuries. That would mean a bond rally is on the horizon after the calamity of the last few months of falling bond prices. If China have only spent about 150 billion US Dollars so far to prop up their equities market it would be inconceivable if the Chinese through a trillion Dollars to bid up US Treasury auctions which would conversely send yields down as prices of US Treasuries go up. Thus we may end up with the Fed unable to raise rates officially if bond yields fall with a spur of Chinese investment in the attempt to drive their Yuan lower in value. Given such a scenario USDX may well smash through the 100 mark even without any strong US data to convince traders to pile into US Dollars. Should such a scenario develop over the next few months we are likely to see USDX through the 100 mark by Christmas and consolidates 100-105 mark and EUR/ USD under severe pressure at the 1.05 mark. Thereafter crude oil 40-45 Dollars due to the Chinese GDP crisis and Iranian output increase and gold bullion down to 1050 mark.
Finally the Saudis are not happy at all. The price war seems to have backfired since the Saudis expanded production and pushed down prices last December from the 100 Dollar mark to the 40's. Yes the US shale industry was devastated and the Russians almost went near total collapse but what goes round comes back as the Saudis are now forced to compete in Asia for market share.
See on Reuters - http://www.reuters.com/article/2015/08/06/us-saudi-crude-asia-idUSKCN0QB1HB20150806
Always look to support and resistance band lines as the key to understanding in the long and short term where prices are converging. Professional technical traders use 50 day and 200 day medium and slow moving averages as fundamental cornerstones for interpreting the direction of price action.
USDX
US Dollar
97.775 -0.127 -0.16%
Support 95.830 Resistance 98.530
Forward 1 year - 98.344s.
97.775 -0.127 -0.16%
Support 95.830 Resistance 98.530
Forward 1 year - 98.344s.
EUR/USD
1.093200 +0.002400 +0.22%
Support 1.08123 Resistance 1.12003
Forward 1 year - 1.10760s.
1.093200 +0.002400 +0.22%
Support 1.08123 Resistance 1.12003
Forward 1 year - 1.10760s.
Crude Oil
44.95 -0.20 -0.44%
Support 44.56 Resistance 48.40
Forward 1 year - 53.50s.
Forward 1 year - 53.50s.
Gold
1086.95 +1.94 +0.18%
Forward 1 year - 1,101.4s.
Pieter Bergli - DeLoren Trust Holdings
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