King Dollar breaks out, as Draghi/European banks lower interest rates!
Recently King Dollar found it self on multi-year support, created a bullish falling wedge and very few investors were bullish the U.S. Dollar. This was a set up for a rally in King Dollar!
The Power of the Pattern and Joe Friday highlighted set up for a Dollar rally about couple of weeks ago (HERE)
With Europe lowering interest rates, is Draghi expressing/confirming a concern for "Disinflation or Deflation?" Just last week Joe Friday and the Power of the Pattern reflected breakdowns in key commodities and the Deflation/Disinflation theme. (Here)
Euro Swings Significantly, Gold Dips Following ECB Rate Cut Announcement; US Tapering Coming Up?
Here is a 10-minute Euro chart that shows wild swings following the Unexpected ECB Decision to lower rates today.
10-minute Euro Chart
The Euro swung 2 cents vs. the US dollar but has now regained about half of the move.On a percentage basis, these are substantial swings.
10-minute Gold Chart
Charts from Barchart.
Gold fell about $30 following the ECB announcement and has taken back about a third of the decline.
US Tapering Coming Up?
Is competitive currency debasement bad for gold? It shouldn't be.
Likely, this is more of an over-reaction to the still-lingering belief that the Fed is going to taper.
How likely is that? Not very according to Bloomberg columnist Caroline Baum in her article today A GDP Report in Search of Liftoff
While real GDP increased 2.8 percent in the third quarter, inventories accounted for almost a third of the growth. Consumer spending added 1 percentage point and net exports 0.3 percentage point. Real final sales, which is GDP less inventories, rose 2 percent, close to the trend since the recession ended in June 2009. Final sales to domestic purchasers, which excludes exports and includes imports, rose a meager 1.7 percent.
So there you have it. Almost five years of zero-percent interest rates, about $3 trillion of asset purchases by the Federal Reserve and lots of forward guidance on both, and the U.S. economy still can't get out of its own way. Whatever else the Fed decides, tapering asset purchases isn't in the cards any time soon.
Should vs. Will are Horses of a Different Color
Given the huge asset bubbles in equities and corporate bonds, the Fed ought to be tapering now. Then again, given that repetitive bubble blowing never makes any sense, the Fed should never have launched three rounds of QE in the first place.
But what the Fed "should" do and what the Fed "will" do are horses of a different color. Baum is highly likely correct in her assertion "tapering asset purchases isn't in the cards any time soon."
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Apr 14, 2021 1:41:25 GMT -6
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jeffolie: One might short a bull ETF to gain the decay but this requires a margin position subject to changes imposed by the exchanges & brokers
Oct 26, 2013 13:26:07 GMT -6
jeffolie: Holding a stop loss in these algo dominated markets almost always means the algos will hit your stops
Oct 26, 2013 13:20:09 GMT -6
jeffolie: Even so, these leveraged ETFs do not create margin calls nor expiration dates thus allowing one to hold indefinitely
Oct 26, 2013 13:17:52 GMT -6
jeffolie: Yes, the ETF features fading/leveraged decay because the futures and/or options used decay plus the administrative costs rise the decay, declining value ... I accept this as a cost and feature of all ETFs that purchase futures/options to maintain price
Oct 26, 2013 13:15:38 GMT -6
mimzy: jeffolie ~ I've been reading/lurking you for a year or three now and was wondering if your could you explain how you overcome quantum fading/leveraged decay in your ETF short position of the DJIA?
Oct 25, 2013 20:46:26 GMT -6