Complete separation in Usd-Equity trade correlations have been seen overnight as the allure of holding the Usd as a safety play was finally rejected, after running at a very high percentage link that saw Usd Up- S/P Down and vice versa.
The move to sell the dollar index down to test support at 80.00 while equity markets were also sold lower may be the first signal that the cost of holding the dollar, and the premium required to insure safety, is going up.
The FOMC rate statement offered nothing new, outside of a cynical plot to hold off announcing quantitative easing programs until the mid-term elections, but speculative interest made the decision that enough was enough and the sheer number of dollar bills in circulation now has to be accounted for.
It would seem that on days that global equity markets move higher the Usd will be heavily sold, whereas on the days of global equity losses the flight to safety will not be to the over-bloated Usd-based Treasury market.
Traders will favor a reversal to support on the major currencies, and then to buy them against the dollar, especially if the Wednesday and Friday Treasury auctions allow equity markets to ramp higher, as has been the case recently.
Eur and Chf moved against the dollar overnight, with Usd/Jpy attracting a slow and steady dribble of sellers. Cad, Aud, and Gbp were unable to add to the previous session gains. The interesting part was the fact that although global equities tested Nikkei support at 9500, German Dax support at 6200, and S/P support at 1128, the speculators were not giving up on their short-Usd positions.
Gold moved ever closer to 1300 an ounce, looking likely to test 1400 or 1600 before 1000 is tested. The gold standard is being re-built and the fiat currencies will once again be stripped in value when priced in gold. The impact of a move out of Treasury notes and into the yellow metal will add to the sell side of the Usd on the days of equity appreciation.
The last three years of trade have been dominated by the daily requirement to either hide or extract positions on balance sheets that may have been less than worthy, but sooner or later the over-leveraged toxic debt that seemed impossible to value for so long will hit the market.
The move will drop equity and commodity values lower for a time as books are balanced and fair value on debt re-calibrated, but until then the daily moves to clear positions as each regional exchange opens and closes will dominate proceedings.
There really does not look to be a major currency that is much better off than the Usd in regard to forward growth and, outside of Aud which has weathered the economic storm far better than most, and that will also add to the sporadic and sometimes volatile intra-day moves that reverse off the previous session highs and lows.
The FOMC rate statement offered nothing new, outside of a cynical plot to hold off announcing quantitative easing programs until the mid-term elections, but speculative interest made the decision that enough was enough and the sheer number of dollar bills in circulation now has to be accounted for.
It would seem that on days that global equity markets move higher the Usd will be heavily sold, whereas on the days of global equity losses the flight to safety will not be to the over-bloated Usd-based Treasury market.
Traders will favor a reversal to support on the major currencies, and then to buy them against the dollar, especially if the Wednesday and Friday Treasury auctions allow equity markets to ramp higher, as has been the case recently.
Eur and Chf moved against the dollar overnight, with Usd/Jpy attracting a slow and steady dribble of sellers. Cad, Aud, and Gbp were unable to add to the previous session gains. The interesting part was the fact that although global equities tested Nikkei support at 9500, German Dax support at 6200, and S/P support at 1128, the speculators were not giving up on their short-Usd positions.
Gold moved ever closer to 1300 an ounce, looking likely to test 1400 or 1600 before 1000 is tested. The gold standard is being re-built and the fiat currencies will once again be stripped in value when priced in gold. The impact of a move out of Treasury notes and into the yellow metal will add to the sell side of the Usd on the days of equity appreciation.
The last three years of trade have been dominated by the daily requirement to either hide or extract positions on balance sheets that may have been less than worthy, but sooner or later the over-leveraged toxic debt that seemed impossible to value for so long will hit the market.
The move will drop equity and commodity values lower for a time as books are balanced and fair value on debt re-calibrated, but until then the daily moves to clear positions as each regional exchange opens and closes will dominate proceedings.
There really does not look to be a major currency that is much better off than the Usd in regard to forward growth and, outside of Aud which has weathered the economic storm far better than most, and that will also add to the sporadic and sometimes volatile intra-day moves that reverse off the previous session highs and lows.
Disclosure: N/A
