Wednesday, August 7, 2013

USDX 81.40-The War To Defend the Dollar Heats Up

In the midst of some singular economic news, not the least of which is the unprecedented closing of US embassy and Vatican accounts by the British owned Hong Kong Shanghai Bank Corporation (HSBC), the US Dollar world reserve currency has apparently hit a critical point of inflection on the technical charts of the USDX. Garnering attention across the spectrum of economic analysts and Forex currency traders, not to speak of government officials and international economists, the 81.40 level has been breached to the downside occasioning many and various attempts to interpret the inherent weakness displayed by the
dollar as even the JPY made sudden and unexpected gains against it as the carry trade in that currency began to unwind. While most conventional analyses see this "weakness" as a prelude to further gains by the rapidly fading reserve currency, this important pivot might provide some surprises in the direction of the greenback as it proceeds to what many analysts expect to be its eventual demise and extinction as world reserve currency. In respect of this we have the following from Bloomberg.
“The market has dictated the 82.41 level as a pivot,” MacNeil Curry, New York-based chief rates and currencies technical strategist at Bank of America’s Merrill Lynch unit, said yesterday in a telephone interview. “If we get back above that, it would be a good sign that we have a base in place and a larger bull trend can resume.”

A similar bullish forecast was evident in the analysis at STOCKTRKR which along with Bloomberg anticipates a "bullish" positioning by currency traders anticipating further gains by the dollar in a commentary by Instaforex.
The longer-term view remains bullish as there are signs of a trend reversal from the 76,4% Fibonacci retracement. The decline looks corrective and that is why we expect a bullish reversal. Concluding we remain cautiously bullish above 81.40 and we would add to our long positions if the prices break above 82.10 and 82.50 targeting 83.45
On the other hand, Toby Connor over at Goldscents expects the opposite effect resulting in a decline in the dollar into the fall of 2013.


"Today the dollar broke through 81.40. This is a major development as it signals that the current daily cycle topped in only 2 days, thus confirming that the intermediate cycle has also topped."

"I've been warning for months and months that this was coming. Anyone with a modicum of common sense knew that printing trillions of dollars was going to eventually have consequences. There is no escaping the inevitable; if you aggressively debase your currency eventually you are going to have a currency crisis. The first one has now begun. 

Over the next 3-4 months the dollar is going to test the lower trend line of the megaphone topping pattern and ultimately break through. When it does we are going to witness a spectacular collapse in the dollar, probably testing the 2011 bottom by the next intermediate cycle low due in November. "
Such widely divergent views of the relative value and strength of the reserve currency are indicative of the efforts taking place internationally to supplant the dollar as settlement for world trade, particularly in oil, as evidenced by agreements primarily between Russia and China to forego dollar exchange in favor of local currency especially in light of the relative strength of the Chinese yuan/renminbi, with gold based exchange also being employed as between Iran and India in settlement for Iranian oil.

Accompanying these economic maneuverings, which Connor and many other commentators have rightly adduced as a currency war, we have the geopolitical ramifications accompanying the obvious and massive economic dislocations. Interestingly enough it was Saddam Hussein and more recently M. Khaddafi who first had the temerity to attempt to effect exchange and settlement for petroleum in respectively, the Euro and the gold dinar, bringing down the wrath of the oligarchical dollar empire upon their themselves and their unfortunate countries.

Meanwhile on the domestic front, once again as suggested by Connor amongst many others, the now notorious Federal Reserve continues to enter digital electronic counterfeits onto the ledgers of banks, corporations, and equities which along with actual negative interest rates have completely destroyed capital formation further eroding and eventually undermining what remains of "the full faith and credit of the United States of America." And thus in such a hopeless and grotesque conundrum, the empire lurches towards its denouément.

August 8
It appears that our little gambit yesterday appears to have panned out irrespective of the professional economic analysts at Bloomberg et al. and their call for a strengthening of the US$ as the greenback further sinks below 81 on the USDX. It increasingly appears that these mainstream analysts are paid either to spread disinformation and misdirection or are simply incompetent. look out below!http://www.zerohedge.com/news/2013-08-08/sudden-dollar-weakness-tapers-early-euphoria-sends-gold-spiking 

What these indications clearly signal is that gold and silver and the commodity complex in general have once again assumed an inverse relationship to the US$ especially given the spike in yields on the TNX Ten Year Treasury Bond following the Fed doyen BS Bernanke's disingenuous if not outright meretricious suggestion that the Federal Reserve will "taper" more than $85 billion monthly MBS purchases as early as September, the mere suggestion of which was enough to send international equity markets into spasms of contraction.

Of course the fact that the markets are dependent now, not on any real fundamentals, but merely on the ephemeral suggestions of a possible (but highly unlikely) monetary policy of the Federal Reserve itself suggests the very artificiality of the global economy has reached new and improbable heights of absurdity. Further evidence of this unprecedented economic dissociation was evidenced when the amassed debt of Japan reached the eye popping one quadrillion yen level or more than double the island nation's total GDP.

The successive reiterations of electronic conjuring of money practiced by Nippon over the past decades have reached mind boggling levels of absurdity and apparently have gone into hypersonic overdrive with the latest manifestation of exponential monetary largesse under the tutelage of the new schoolmaster of Keynesian dystopia, Shinzo Abe. Meanwhile as the IMF  has coyly suggested, the Japanese money masters are proffering the idea of increased sales taxes to compensate the mounting tsunami of debt, something akin to dropping handfuls of sand into the devastating tsunami which struck the island two years ago.http://theeconomiccollapseblog.com/archives/a-quadrillion-yen-and-counting-the-japanese-debt-bomb-could-set-off-global-panic-at-any-moment

Indeed, if there was any simile or metaphor expressive of the effects of expansive monetary policies practiced by our central bank witch doctors typified by the Federal Reserve and the JCB, it would be this parallel in nature, the disastrous inundation recorded in the video above and with similar effect upon economic life.

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