So the deflationary err… issue of the last year served to what? Beuller? Anyone?
'Get the herd on the wrong side and lay the groundwork for a coming whopper of an inflation! Yes… very good.'
At least that is what we are led to believe Ben Stein's economics professor would have confirmed to the class. It sure does seem handy that the USD has been king since last summer and the mighty and ultra safe (ha ha ha) US T bond has been the safe haven in the investing world. These are the areas in which the Fed would seek to leverage the new found confidence in its inflation-making machinery as they compromise these assets. USD and T bonds came to be so aggressively owned after all by the frightened herds.
'Why oh why is the stock market up??' ask the despondent bears. That's why; money is running to asset markets at the behest of the Federal Reserve's hints.
USD daily chart, next support shown
I think it is wise to await the coming FOMC release before leaning too heavily one way or another, given that asset markets have already priced in some inflationary talk or action. But it is obvious that unless the Fed loses its mind and decides to do the right thing and abandon its modus operandi of leveraging the currency in the name of asset appreciation and economic sustenance (diminishing though it is), the USD is earmarked for lower levels eventually.
The chart says it's over sold. It also says it is losing a support zone. The next support is noted. The precious metals are getting beat on a bit for the second day in a row. This is expected and is a sign that they love us. Gold should not be rising into the FOMC release.
I still have concerns about the precious metals' over bought status and the CoT structure, but I also wonder if the hits on the PM's are clearing some of that short interest out. We'll see, but the main point of this post is to note that there remains room in the US dollar, in T bonds and indeed, in the entire 'deflationary mock up' to get an inflationary operation under way sooner or later.
Will there be news? Will stocks and precious metals sell or buy the news? Today starts the clock ticking.