Normal life took its toll and demanded some attention, and this might very well be the tune for the next month as well. However, my IRL situation has been compounded with a rather lacking flow of actual fundamental news. So… last week we didn’t expect anything to actually happen, right? Did anyone expect anything to happen significantly in the EUR/USD pair before this morning? The weekly ichimoku analysis basically held it as the could ran up, and the next big thing was that it broke the high-close/low-close 61.8% talked about there, but still held below the HH/LL 61.8% for a while.
In essence, what this last rally looks like it’s buying into is dollar weakness. Nearly everything is up in dollar terms, and at the moment the waters are a little bit frenzied as all the salmon seems to try swimming up the same waterfalls. Yen? Lower on a euro basis and probably on trade weighting as well (need to check this one) and the only reason it didn’t rush above the USD 1/74 line is probably the somewhat weak stimulus and rather desperate efforts by the BOJ to… well… do… something…?
China stimulating the economy? Ok, go! Just watch where inflation ends you up. Kinda old news anyway, who doesn’t have a hunch that China is slightly ahead of the “common” curve of inflation cyclicality? Of course they are also grappling with severe problems unlike any which the world has ever seen (huge segmentation, income disparities, probable bubbles in anything from real estate to specific manufacturing areas, you know the drill) but put European lawmakers in China’s shoes and we’d be in a global recession for the 3rd time in as many years by now! I’m happy gambling though, things are looking good in both gold and Macau gambling stocks.
A few points that happened which I need to address urgently:
- Gold broke its 61.8% fib off the same 1815-1533 range (1709 if you don’t wanna calculate) that I have been yapping on and on about. Currently at 1746. Given how it traded so much within the 23.6% to 50% range, it became somewhat “diluted”, and didn’t have quite the same power, thus getting broken. Now, 1750 is the 23.6% off the 1815-1709 range, and gold is getting resistance here so the fib is obviously still relevant, especially on “fresher” high levels. 1750 is a nice big figure and also the 38.2% off the same range, and getting there requires crossing the 63day SMA (1739) but I will be watching 1733-1721 for support according to my analysis of the price action in the rally from ~1500 to 1912, with an eye on 1734 (23.6% same range fib) Magic-D gives strong support as well at these levels, and I would not be surprised to see a run up to 2000 by year end on that alone. More later, if 1750 is broken and we will get access to the 1815-1850 price levels, which makes 1912 become relevant again and thereby also guesses for 2000.
- The euro has the mother of all relief rallies. Scandies weren’t too bad either, but I’m not entirely convinced here. I’ll outline these reasons in a later post, but this still smells like patch’n’plaster to me.
- All indices broke their previous ranges even before the eurozone decisions, and look set to stay there with the thursday morning action being just the icing on the cake. See the post on the euro later on why this is unlikely to be sustained from a euro-perspective.
- We can now turn our attention to the US budget debate. No wonder everything is rallying, you just got a green light to short the US currency for at least the next two months! Question: can the currency sustain a few new downgrades if the 11th hour solution is essentially just an excuse to set the alarm for noon and still oversleep? Will China have its stimulus (which seems speculative before Q2 2012, mind you) up and running? What presidential candidate musings will throw sand in the machinery? And what will happen to the December trance of Greek bailout money now that Germany itself further to actually make them get their act together (in a horribly unproductive way still) and you have an Italian that wants to be a German running the ECB while The Man of Italy is possibly considering stepping down? Having the US make a mess of itself in this time frame is likely NOT something to be excited about unless you’re straddling every market.
- The yen… I can’t decide whether to feel sorry for Japan or to actually cheer Tokyo on in their rather futile venture to make sure the yen is not sent into orbit. I am currently working on getting a few points somewhat researched here, and I hope I will be able to get this out rather soon. Not expecting too much in terms of currency intervention though, and like I have expected from Mr. Noda, he seems to attempt to cushion Japan into becoming a “strong-yen-policy” nation, which I suspect will be highly needed in the years ahead. This is also being researched at the moment. Nevertheless, no Tokyo trips for me for a long time! 😦
- One to watch: SEK/Anything. Up against the euro and pushing hard against the summer-defining 1/6.32 line against the USD. Going another 1% to the shoulderline of this summer at ~1/6.25? Why not? Be careful though, everyone will be putting a critical eye to risk in the morning, and the hangover from today’s binge can be pretty bad.