Forex Market Commentary
Small hiccup for the Dow shaving -157.14 -0.92%.
Meagre corporate earnings are staring to show on Wall Street as a strong Dollar shows the extend of hurt as the Dow closes at 16,924.75. But it's a free market; or so we would like to believe it is. You cant sell apples if a customer wants oranges and if you're going to sell apples it needs to be at the price consumers are willing to pay. This year the fundamental drag to the US economy without doubt has not been the Grexit scare in the bond markets or the China crisis hitting the equities markets; this year has always been about a strong Dollar that was largely driven by large speculators. hedge funds were the prime cause of the march that pushed the USD up and in doing so triggered commercial buy stops and forces ETFs and tracker funds to follow suit. That is the mechanics of a major forex market move. with the EUR/ USD the move from 1.34 to 1.05 was too rapid as large speculators moved en mass and triggered tracker funds to follow. last week's COT data on the futures contracts still show a whopping 154,220 large spec shorts vs 65,410 long positions. that's a massive 70% of spec positions skewed in favor of short positions that were largely taken up before the 1.20 was hit. in other words although the EUR/ USD has been bouncing strongly and hit the 1.14 mark today, still theres a fair amount to go and we need to see another 40,000 short contracts close position to restore a sense of equilibrium. With Christmas round the corner and traders unlikely to trade in December that means we should see alot of profit taking on the weaker shorts before traders regroup and consider the next big push down after the new year. The ECB want a lower EUR/ USd and are spending 60 billion dollars a week to manipulate the market into a soft fall on the currency so as to engineer a European export drive to increase manufacturing. But right now policy makers must be pulling their hair out watching the Euro go the opposite direction and get stronger versus the USD. This is because ECB policymakers cannot affect yesterday's decisions; markets move in time lags and the massive short positions are a result of yesterday and not today. So small traders look to the 1.20 ahead if long spot and if writing FX options look to the 1.10 - 1.18 range for the balance of this year.
Bullion is having a field day as USD unwinds and traders pile into the shiny stuff. Already were at the 1180 mark and looking for a push over the 1200. Crude oil is range bound lower 46.
What is interesting about following the CRB Index charts is that we can get an overall picture of where the global commodities markets are going. currently the CRb is near the 410 mark and off its bottom reached earlier in July around the 370 mark. the CRB has fallen from 435 at the start of 2015, and in been in descent from 510 at start of 2014 and 560 start 2013. During this period the price of the Dollar firmed and price of gold descended. The reason being the slow down in demand for industrial commodities from China due to weakening export markets in Europe and USA.
Within a macro-economic sense the 4 main pillars of this study are - The USD, by virtue of being the 'international' currency of global choice, the 'Euro' being the second most trade-able currency, crude oil as a barometer of economic activity and gold as an economic store of value. These 4 pillars find interpretation though the daily price action in global equities and fixed income where investors anticipate corporate earnings and forward levels of interest rate to give us a broad sweep and understanding of the markets and how they work as a whole. At a micro-economic level the study of consumer behavior and real purchasing power becomes the central focal point upon which all macro-economic activity can be viewed as the sum.
In speaking of moving averages; markets are not rational and daily price action volatile, but in the longer run trader expectation and negative sentiment can be collectively summed up through the 50 day moving average. 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
94.056 +0.144 +0.19%
Support 94.805 Resistance 96.895
Forward 1 year - 96.270s.
94.056 +0.144 +0.19%
Support 94.805 Resistance 96.895
Forward 1 year - 96.270s.
EUR/USD
1.147575 +0.008720 +0.77%
Support 1.11140 Resistance 1.15640
Forward 1 year - 1.14310s.
1.147575 +0.008720 +0.77%
Support 1.11140 Resistance 1.15640
Forward 1 year - 1.14310s.
Crude Oil WTI
46.88 -0.28 -0.59%
Support 46.02 Resistance 51.96
Forward 1 year - 44.76s.
Forward 1 year - 44.76s.
Gold
1184.980 +10.825 +0.92%
Forward 1 year - 1,133.2s.
Pieter Bergli - DeLoren Trust Holdings
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