Ralph Shell's  Instablog

The US Treasury announced a record 104B of 2, 5 and 7 year notes would be auctioned off next week providing a bi weekly injection of cash so the record 1.8 Trillion Dollar deficit can be achieved.  Plans for the expansion of the government health care, costing another 1 to 3 trillion, will soon received massive promotion from the government toadies in the media.  Opposing views are not welcome and those voicing them can expect personal retribution. Continuing in the same vein the Washington spendthrifts inserted in the military spending bill, a cash for clunkers program, designed to stimulate demand for the US Government Green Car Companies.  With economic policies like these, is it any wonder that the BRIC countries want an alternative reserve currency?  Currently the euro is trading at about 1.2930, down 20 points from yesterday's morning level.  The H4 chart appears to be coiling in a triangle, while the daily chart picture looks like a flag or pennant.  There is very little here that makes me want to assume a new position.  Without some new inputs, the next move may be determined by who wants out of the market.  Stand aside.

Volatility was the feature of the pound this week as 200 point swings were frequent, but the price action for the week was trend less.  After a long bull move, this type of action sometimes precedes a market reversal.  If we close at around the 1.64 level, the weekly candlestick would portray a 'hanging man' which again often precedes a change of marker direction.  The daily charts, however, shows a market firmly in a bull trend.   There have been some reports showing the UK economy is improving slightly, but auto production was reported lower for the 8th consecutive month.  If I had to make a trade today my preference would be to sell the pair close to 1.6500.                

 Now that global equities have become the new safe haven, who need the yen?  We remain in the 95 to 100 trading range, and are currently trading at 96.70.  The Japanese are the second largest owners of US Treasuries, so will we see some yen selling in preparation for the pending US auction?  Earlier this week a Japanese Economic official at the G20 meeting said he saw no reason to stop buying US debt which is now permitted as collateral for Japanese loans.  We prefer the buy side if given the opportunity, at a little under the 96 level.

It was reported that the Swiss officials have reached an agreement with the US, on the auditing of US citizens with investments in Switzerland.  Swiss Central Bank Officials confirmed yesterday that they will interfere if the franc trades under 1.50 to the Euro.  Will they likewise try to weaken the franc to the dollar, or is that too big of a task?  This pair seems sedate, currently trading around 1.0830.  I hate to initiate new trades on a Friday but I would be a buyer if the market sold off close to 1.07.

Stats Canada reported retail sales this morning, far lower than anticipated which suggests the economic recovery to date is weak.  The report caused a 50/60 point drop to the USD, but that has since dissipated, and we are back where it all began at 1.1295.  Equities and crude are trading better this am but most commodities are trading lower.  There is nothing that makes me want to trade this pair right now, so I am going to stand aside.

The higher rates of Australia and NZ continue to attract the international hot money has been reported in financial paper. One advisory service said the currency may be ahead of itself and it need to wait for the fundamentals to catch.  That view is not shared by today's participants as we are back up in the vicinity of .81.  Unless we have constructive  news of more business activity, I would expect the market to stall.

 This pair took out the dual highs at about .6415, this morning, apparently  hit stops, and ran the market up to .6480.  The inflation/commodity story has been told many times, but profits from commodities can be very illusive.  The Kiwi has sold off very little from the high made in early June, so maybe we can print another new high, however I choose to watch.