All Eyes Are Now On The US Dollar

Needing time for recent policy developments to work through the economy, political leaders and central bankers have joined the ranks of the story-tellers, where subjective/synthetic and not objective/analytic discourse takes place. It’s not that the public can’t handle the truth; it’s just that we are not likely to hear much of it. Nothing’s changed. After all, other than the President and one or two minor players, the same people responsible for our predicament are in or close to the White House and still running things in Congress and on Wall Street.

Speaking of Wall Street, ie, the party of the second part, the one needing to raise further hundreds of billions in capital from the very people they have been screwing over, it’s clearly business as usual. As the Econoday economist Anne Picker wrote in her report this weekend,

With few (edit note: positive) economic indicators to weigh, investors focused on the growing flow of earnings reports. Cheers erupted when losses were smaller than expected, especially from financial institutions. The dollar fluctuated with equities - when investors shied away from risk, the dollar gained and when equities rose, dollar lost ground against the yen and euro.

So traders in the US are back to needing a falling $USD, ie, a declining standard of living, to see their equity portfolio make any headway against reality.

After the $USD dropped from 85.99 to 84.70, a W/W loss of -1.50%, Econoday wrote,

Most equity indexes ended the week in an upbeat mood after a choppy week with little new economic data (except in the UK) and an onslaught of earnings reports. And lurking in the background was the inevitable approach of U.S. bank stress test reports which undoubtedly will continue to test investors’ nerves. Conflicting signals on the health of the global economy and the banking sector left U.S. and European equities jittery and there was indeterminate trading at times. Good news came on the banking front as first quarter profits at Credit Suisse beat expectations and Barclays of the UK pledged to resume dividend payments in the second half of this year.

As the pied piper leads the public to look elsewhere for the truth, few people noticed the fact that the price of the $USD (84.70) has slipped below the 50day Moving Average (86.21), seemingly headed for a confrontation with the important 200d MA, which is presently 82.29 and rising. Given that the economy will need a few more quarters to recover from the beating suffered from Paulson’s Folly, all eyes are now on the $USD.

The question now is how far does the Dollar have to fall from its short-term cycle peak (86.87) on Monday this week - and $GOLD, and probably $WTIC, rally- in order for the S&P 500 (^GSPC) to be cranked back up over the market’s cycle high (875.63) six trading days ago?
http://tinyurl.com/24z9zb
http://tinyurl.com/2qrhyj

You will note, if you have your ears plugged (oh, no, not another speech from the Administration and the Fed, please!) and your eyes open, that $GOLD hit its cycle low, also six trading days ago at 865, and closed this Friday (+5.05%) at 913.
http://tinyurl.com/2hzf23

This is no coincidence, Prices in capital markets do not trade in a vacuum; they are interconnected. The sooner people learn to watch prices dance in the market, the sooner they will stop listening to nonsense of the kind that enemy traders start, and financial talking heads spew.

We, as a community, need to make our own music so that at the end of the dance we can honestly say we enjoyed the experience; that our wealth and our freedom was not taken from us. Together, standing by each other, we can ignore the reality of Washington and Wall Street (and the other stuff going on in our lives) and work to create a better world.

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