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Green Shoots Fatigue & Intermarket Setup
The much-anticipated dollar rebound will rather emerge on "Green Shoots" fatigue rathern misplaced views of a US economic recovery preceding the rest of the world.
Hi Ashraf,
I have couple of comments to make.
1) The panic in financial markets ended in march - currency majors are converging to their pre september positions with the additional impact of new macro fundamentals. This is Dollar and Yen negative. Risk not required --> yield required.
2) The financial panic has brought out new weaknesses in the US. For example, job losses in autos are permanent. Add to it all the losses from construction, banking, IT outsourcing etc and we have a new "normal" of 10% unemployment in US which is here to stay. Obama policies cannot add 5m new jobs, (which sector will hire??) so the US economy stagnates for years to come. If the US raises interest rates, the economy tanks, and if they dont ... at some point the rest of the world will shy from the dollar. The only way Dollar benefits is new Panic - another war or another financial panic? I wd think war would be closer..... think korea.
3) On a technical level, I would highlight that since July 08, the drop in euro and the time it takes for the drop is decreasing. Aug to Nov low took 4 months and 35 cents. The next peak to trough took two and half months and 22 cents and so on. Now, the Eurodollar appears to be on a breakout....
I would like to add a couple of charts which are in jpeg but does not look like it is doable in your site.
great work..
j