Quotable
“Money is not an invention of the state. It is not the product of a legislative act. The
sanction of political authority is not necessary for its existence.” – Carl Menger

FX Trading – Dollar blues…Ugly policies…Hampered markets…gold over $1,000

• Gold through $1,000
• Oil back over $70
• UN wants a new reserve currency
• China alarmed by US money printing
• Obama asks senate to increase debt ceiling

Boy, you know it’s bad when the UN gets into the act and people actually take them seriously.  

Is this a crystallized negative sentiment extreme in the dollar?  We will only know that with the gift of hindsight of course, but there may be more to go given how nicely government policies seemed aligned to prolong the down turn.  Plus, there is another 10% or so left on the downside before the dollar tests its old low made back in March 2008.  

The stuff we are seeing and hearing is likely to concern even the most ardent dollar supporter.  Maybe we saw a lot of them capitulate yesterday.  A friend of mine from Chicago emailed, he said take a look at the volume in the UD dollar index; it’s huge!  Does it mean anything?   

So to the chart I went.  Sure enough, it was huge.  You can see it at the bottom of the daily dollar index chart below:

…read pages 2-4 HERE.

Ed Note: Jack Crooks wanted to let readers see an example of his:

8 September 2009                  CAD and Euro Charts

Comments: Canadian dollar recommendation Issue #31 & Room for euro to run! You should not yet be filled on this order yet.   The G-20 signaled it’s too early to take awaythe punch bowl.  All things risk appetite seems to like it.  Dollar LIBOR rates feel to a record low in London—adding some weight to the dollar- carry trade idea. Dollar yields now even less than the yen—former carry trade king.  Swiss is the only major now lower than the buck.

Sept. 8 (Bloomberg) — Dollar-borrowing costs fell against those for Japan’s currency, widening the interest-rate gap between the currencies to the widest level since March
1993.  The London interbank offered rate, or Libor, for three- month dollar loans declined to a record low 0.30875 percent yesterday from 0.31438 percent on Sept. 4, according to the British Bankers’ Association. Libor for yen loans dropped to 0.37938 percent from 0.38125 percent, widening the difference between the rates to 7.1 basis points.  Dollar rates became cheaper than those on the yen on Aug. 24, leaving the Swiss franc as the only major currency that is cheaper to borrow than the dollar. Since then, the spread= between the rates has widened for nine-straight days. 

There’s talk the ECB and BOC are getting very nervous about the dollar.  The background move in gold (back above $1,000 this morning) probably reflects some of that, also sentiment that continued monetary ease will be harder to mop up down the road is again adding weight to the inflation argument—true or not.  Oil is up over two bucks, back above $70 this morning.    This is all very much consensus stuff and stuff that we do know; but a good backdrop for the Canadian dollar to play catch up to the other commodity currencies (Aussie and New Zealand) already trading in new intermediate-term high territory.  We are playing for a breakout in the Canadian dollar above its intermediate term high.   Note: Futures traders; the Sep contract goes off the board on September 15th, next Tuesday

The key level traders were watching in Euro – $ was 1.4450; the euro cleared that resistance today. Next major resistance doesn’t come in till 1.4700-area.

Regards,
Jack & JR