Global FX Economy 7th Oct 2015. A window missed? Markets, news and analysis.

Forex Market Commentary  

If US economic growth slows the Fed has little room.

With a slowing US economy the US Fed may have lost what wiggle room it could have built and should have built earlier this year if it had raised raised by 2-3 increments by 75 basis points. All markets are cyclical in nature; they go up and they go down and elongate this pattern over repetitive waves. History repeats itself time and time again. Thus should the Chinese economy grind to a slower pace of economic growth and the Euro zone slow down simultaneously, then the US economy will be slowing down too for all markets are correlated and economic cycles between the 3 main areas of US, Europe and Asia follow similar waves of economic expansion and contraction. In the year 2001 the greatest commodity bull market began with the CRB Index, Commodity Research Bureau, rising from the 200 mark to near 700 with historic highs in the year 2011. this was the decade of the Glencores and the Trafiguras and the commodity giants that scoured the globe for precious resources to capture to feed a hungry growing China. For 30 years from the 1970's till 2000 the CRB Index was trading in a range form the 200 mark to 300 mark. The following decade saw the explosion of commodity prices as the Dollar weakened and China grew at dizzying economic growth rates  Today the CRB Index stands at 399 just under the 50% retracement mark.

The last few weeks saw the near collapse of the commodity trading houses. With the US Dollar at such highs and most commodities priced in Dollars trading had almost ground to a halt. Over-leveraged and up to their eyeballs in debt the commercial banks came to their rescue. But why? Could refinancing at lower interest rates be the explanation? Why would banks throw good money after bad? When Long term Capital management went belly up trading interest rate spreads did the commercial banks think that trading your way out of a bad position was a good idea? So what makes the banks think that the Glencores and Trafiguras of the world can trade their way out of their current colossal debt? There is only one explanation; The USD Dollar will retrace at least to the 50% Fibonacci of its last technical ascent if we are to follow the harmonics of technical analysis.  Dollar declines spur companies to increase their commodity purchases. The banks surely know that Fed Chair Yellen will not raise interest rates this year and only with extreme caution in 2016 with a US election round the corner and so it will become a very tough act indeed. If world economies are sluggish who is to say that the big trading houses can trade their way out through economic pace picking up round the world? that would be a false assumption. No; indeed the answer comes back to the US Dollar. Therefore, Dollar longs be warned. Cheap credit means Asia can stand back up and that can feed into picked up demand for commodities.


Read on Reuters here:

http://www.reuters.com/article/2015/10/06/us-commodity-traders-idUSKCN0S01WK20151006 

and watch on Bloomberg:

http://www.bloomberg.com/news/videos/2015-10-08/dimmer-prospect-for-fed-rate-hike-lifts-emerging-markets 

1. The Dow closes in positive territory yet again at 16912.29 or +122.10 and +0.73% and is consolidating nicely over the 50 day MA 16800. Traders look ahead keenly to a fresh challenge of the peak at the 18,300 region of last Feb - May 15.

2. USDX is slipping closely to the 92 mark as traders see soft rates till Q1 next 2016.

3. In the commodities markets crude oil gains on soft dollar with WTI holding  ground at the 47 mark in a rapid ascent and gold now at 1143 is trying to retrace from the 1100 mark since its fall from 1300 back in Jan 15.

Read on Bloomberg Barclays Bank explanation how softer commodity prices since August 2014 have become a parallel program to QE to pump liduidity back into the international monetary system:

http://www.bloomberg.com/news/articles/2015-10-07/barclays-petrodollars-were-basically-another-quantitative-easing

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 
95.503     -0.070 -0.09%       
Support 95.805     Resistance 96.895
Forward 1 year - 96.270s.

EUR/USD
1.12395     -0.00295 -0.26%
Support   1.11140          Resistance 1.12640
Forward 1 year - 1.14310s.  

Crude Oil  WTI

48.03     +0.22 +0.45%

Support 43.02  Resistance  47.96
Forward 1 year - 44.76s.

Gold

1143.900     -4.400 -0.38%

Support  1,106.0    Resistance 1,122.4
Forward 1 year  -  1,133.2s.

Pieter Bergli - DeLoren Trust Holdings

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