Goldilocks Ends and "Currency Wars" Begin

IMG Auteur
Published : February 04th, 2013
600 words - Reading time : 1 - 2 minutes
( 0 vote, 0/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...
Category : Crisis Watch




Amid continuing inflationary policy, the US Dollar is at a critical juncture by both daily and weekly charts. Euro targets 142+ and the Yen approaches our target. Currency war kicks off; gold just sits there biding time.

From last week’s eLetter:

“A Goldilocks atmosphere was expertly created in large part due to the fact that Operation Twist (yes, we are still dealing with its effects) by its very definition held long-term interest rates down (buying long-term T bonds) while sopping up any money supply implications and inflationary signals by sanitizing the process with the sales of equal amounts of short-term bonds.”

Policy makers have not found a new way to indefinitely manage the economy. Traditional laws of economics have not been repealed. The Federal Reserve used the equivalent of a macro parlor trick to dampen inflation signals and help produce today’s Goldilocks atmosphere, which features stocks rising now that the public and its mainstream money managers feel the worst is over with respect to the Fiscal Cliff non-event and the Debt Ceiling noise.

But in economics and macro finance, there is is always a price to be paid for unnatural (read: man-made) distortions. The Fed ran out of short-term bonds to sell and now something has to give, as its ongoing inflationary operation is now unsanitized.


A bearish Head & Shoulders pattern has formed on the currency for which the Fed is supposedly a steward. If the neckline breaks, the measured target is 76.50.


The weekly chart of USD targets 74 off of an even more significant H&S, with the baby H&S of the first chart merely representing the right shoulder of the big daddy H&S.


A breakdown in the US dollar would confirm that the recent tick higher in Adjusted Monetary Base is the beginning of a new trend up in inflationary policy.


Unsurprisingly, USD’s chief rival, the Euro is in an inverted and bullish H&S. We have been targeting 142 in NFTRH since the break above the neckline. The Euro appears to be attracting a ‘long Euro/short Yen and gold’ momentum (read: hedge funds) crowd playing the opposite game to that from mid 2011 when Yen and Gold rose strongly in reaction to the Euro crisis.


Yen has been played to the hilt by the hedgies. We have had 106 as the downside target since the neckline to the massive H&S broke down. Yen could be a heck of a contrarian play for a counter trend rally, as the short-covering should be massive.

Meanwhile, the currency that resides outside the system bides its time. Gold is unofficial money and with all the hype about currency war people who are not patient may have expected a rocket launch in the precious metals.


Here we bring it back to the Euro and realize that too many unhealthy would-be gold bugs came aboard during the acute phase of the Euro crisis in 2011. That is being worked off now in gold’s ongoing consolidation.

Bottom Line

US dollar looks bearish. Euro looks to complete its rally to 142+ where it will by the way, encounter a bigger picture DOWN trend line. Yen is bearish but due for a whale of a short-covering bounce soon.

In the near-term some currencies are bullish and some are bearish. But the US Fed, Europe’s ECB and the BOJ are not going to engineer their way out of their respective ‘inflate-or-die’ predicaments. Gold may have a few more months of correction/consolidation but that is a drop in the bucket when viewing its entire history as a monetary anchor to value.

Gary Tanashian

Biiwii.com, Twitter, free eLetter, NFTRH


<< Previous article
Rate : Average note :0 (0 vote)
>> Next article
Comments closed
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
The Flat Earth Society Responded To A Tweet By Elon Musk: ‘Thanks F...
11 DecS W.-1
Thanks for letting me state my opinion! Your comment is insulting. Try as I might I am yet to find any scientific evidence of AGW or the e...
Peter Schiff Warns Of CRASH: ‘Everybody Is Going To Get Wiped Out!’
08 DecThe Recusant
"Schiff also said no one knows when this is going to happen for sure, only that it will happen." Peter has been warning of the next crash for years...
Meet The World’s Most Powerful Bitcoin Backers
07 Decsonora69
Why run a business or work for one when you can mine bitcoins for the price of the servers and electricity? The higher the price of bitcoin, the mo...
What Now?
04 DecDoom
Mathematically, doubling down is an amazingly powerful strategy...until it isn't. http://professorconfess.blogspot.com/2017/11/doubling-do...
The Flat Earth Society Responded To A Tweet By Elon Musk: ‘Thanks F...
03 DecS W.
I put the Flat Earthers in the same category as those who believe there is a God, a Heaven and a Hell.
Whipping-Post Politics
02 DecMr. Gnawbone1
I couldn't agree more, Keillor's dismissal was a bridge too far, but it is reflective of the fear, by Boards of Directors across the US, guiding ...
The Flat Earth Society Responded To A Tweet By Elon Musk: ‘Thanks F...
30 Novprljr1
The majority of Humans are ignorant. Private central banking is a prime example of what the majority will swallow as a working financial syste...
Bitcoin’s Inconvenient Truths: The Silence Is Deafening - Dave Kran...
30 Novstew temby
Dave I agree with your analysis but there are a maybe a couple of outstanding differences. First, the BTC community may reject the derivative rig c...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS