Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

US Dollar Key Fundamentals

Currencies / US Dollar Apr 08, 2019 - 07:05 PM GMT

By: Gary_Tanashian

Currencies

A reminder that we are not using the standard gold bug method of evaluating the USD (perma “death to the dollar!!”). We are using fundamentals in evaluating its potential to correct (and launch a global macro trade). The blue shaded boxes on this weekly chart tell the story of Fed policy (Fed Funds/3 mo. T-Bill) that significantly lagged the upturn in the 2yr yield into late 2015. But USD turned up much earlier (in 2014) to follow the 2yr.

Today we have an opposite situation. The 2yr has turned down (putting the Fed in dove mode) but Fed policy is going sideways. We are relatively early in a new blue box and if the correlation between USD and the 2yr holds (in reverse) either USD will correct soon or the 2yr will rise again (and whipsaw an increasingly clownish looking Fed).


And so here we find the index potentially in a small bear flag as it tries to hold support at the SMA 50. What I don’t like if I am an Uncle Buck fan is that it broke to a new high and then failed to a precarious low. It seemed an impulsive move. Of course the buck was going to then rally again because post-FOMC everybody got on the weak dollar train. Was that downside a scout for coming bearish activity?

To help answer that question we turn to the Fed Funds Futures wise guys at CME Group.

Not only do these players not see a coming rate increase, they actually still see increasing odds of a rate cut coming by year end. The above is just the December snapshot, but if you go meeting by meeting, these odds makers see no hikes gradually leading to a possible rate cut in 2019.

What I simply don’t get is the US stock market flying around up there testing its highs. This is the best of all worlds for Donald Trump, a tantrum throwing rich kid come real estate baron who is used to getting his way at all times.

I still don’t buy the crap out there about Jerome Powell being weak and giving in to Trump and the powers that be. I buy what I see with my own two eyes and what I see is a 2yr yield that began to drop in earnest in Q4 2018, triggering the dovish Fed.

Bottom Line

The Fed is doing what it would normally do when given weak signals from the bond market (strong bonds, weakening yields) and going into dove mode. But the stock market has gotten no such memo about weakening.

If stock market strength is indicating that a soft patch in the economy is passing (eyes on the Semi sector, especially) then the Fed is being whipsawed into overly accommodative policy, which could launch a serious cost-push inflation issue. If the 2yr yield is right, then there could yet be a long way for equities to fall because the initial stages of a Fed weakening cycle usually see assets dropping into a deflationary event. More to follow as we develop the story and flesh it out.

Subscribe to NFTRH Premium (monthly at USD $33.50 or a 14% discounted yearly at USD $345.00) for an in-depth weekly market report, interim market updates and NFTRH+ chart and trade setup ideas, all archived/posted at the site and delivered to your inbox.

You can also keep up to date with plenty of actionable public content at NFTRH.com by using the email form on the right sidebar and get even more by joining our free eLetter. Or follow via Twitter ;@BiiwiiNFTRH, StockTwits or RSS. Also check out the quality market writers at Biiwii.com.

By Gary Tanashian

http://biiwii.com

© 2019 Copyright  Gary Tanashian - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Gary Tanashian 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