The dollar continues its downward 30-year super-trend against the yen. The Bank of Japan (BOJ) appears unable to support the dollar at current levels and breakout below ¥80 warns of a decline to ¥70*.
* Target calculation: 80 – ( 90 – 80 ) = 70
Europe falls heavily at open
Dow Jones Europe Index collapsed at the open of European markets, breakout below 225 signaling another down-swing with a target of 185*. 63-Day Twiggs Momentum declining below zero indicates a strong primary down-trend.
* Target calculation: 225 – ( 265 – 225 ) = 185
Euro troubles Pound Swiss Franc
Concerns about its European trading partner dragged the Pound lower against the greenback. Target for the initial primary decline is $1.53*.
* Target calculation: 1.59 – ( 1.65 – 1.59 ) = 1.53
The Swiss Franc is now headed for a test of parity against the greenback, dragged lower by its peg at €1.20.
* Target calculation: 1.20 – ( 1.40 – 1.20 ) = 1.00
Loonie turns, will Aussie follow?
Canada’s Loonie broke parity against the greenback, confirming a primary down-trend and offering an initial target of $0.94*.
* Target calculation: 1.00 – ( 1.06 – 1.00 ) = 0.94
The Canadian and Aussie Dollars have tracked each other closely over the last year and it seems inevitable that the Aussie will follow the Loonie below parity.
Aussie Dollar heads south as commodities weaken
The CRB Commodities Index is trending downwards in a broad trend channel after a failed rally to test resistance at 350. Expect a test of the long-term rising trendline at 300. The 63-day Twiggs Momentum peak below zero confirms a primary down-trend.
The Australian Dollar broke support at $1.02, signaling a primary down-trend, before testing medium-term support at parity. Failure of support — and breach of the rising trendline — would confirm the down-trend and offer a target of $0.94*.
* Target calculation: 1.02 – ( 1.10 – 1.02 ) = 0.94
Race to the bottom
The euro is outstripping the dollar in their race to the bottom. Having respected resistance at $1.40, breakout below $1.35 would signal a test of the next major support level at $1.30*. The 63-day Momentum peak below zero confirms a strong down-trend.
* Target calculation: 1.40 – ( 1.50 – 1.40 ) = 1.30
Westpac–ACCI Survey of Industrial Trends
The Westpac–ACCI Survey of Industrial Trends reports that:
• The fall in general business conditions is sharper than in 2008/09
• Labor demand softened and availability of labor increased appreciably
• Firms’ profit expectations slumped further — the weakest since 2009.
It concludes with the following statement:
This is a survey which is sending a very clear message. It is time for the authorities to ease financial conditions. Inflation pressures are weak; labor markets are soft; and investment and export plans have softened. Westpac predicted that the Reserve Bank would cut rates in December back in mid July. The case for lower rates is now strong.
QE Can’t Save the Day… We’ve Done a Version of It For Over 10 Years | ZeroHedge
While most commentators proclaim that QE is a completely new phenomenon, we have in fact seen a version of it in the form of the Fed’s and Asia’s (especially China’s) purchases of US Treasuries/ currency pegs over the last decade or so.
Indeed, today, the Fed, China, and Japan collectively hold 61% of the $10 trillion of US debt held by “the public.” When you add in the additional $4.6 trillion in US debt held by “intragovernmental holdings” (basically the Federal Government buying Treasuries by raiding Social Security and other pension funds) you find that Asia and the Feds have monetized $10.7 trillion of the US’s total $14.6 debt (roughly 73%) over the last 20 years.
via QE Can’t Save the Day… We’ve Done a Version of It For Over 10 Years | ZeroHedge.
The Next Selling Wave Is About to Begin | Toby Connor | Safehaven.com
As the stock market moves down into the next daily cycle low and the selling pressure intensifies, this should drive the dollar index much higher. It remains to be seen if gold can reverse this pattern of weakness in the face of dollar strength, especially since the dollar will almost certainly be rallying violently during the intense selling pressure that is coming in the stock market.
via The Next Selling Wave Is About to Begin | Toby Connor | Safehaven.com.
When the dollar strengthens, gold normally falls. Except in times of high uncertainty (like the present), when demand for gold as a safe haven overcomes downward pressure from a stronger dollar. Buying gold at current prices is a bet that either Greece will default — a pretty safe bet — or that the Fed is again forced to use its printing press (not quite as certain).
FRB: Press Release–Federal Reserve issues FOMC statement–September 21, 2011
The Committee continues to expect some pickup in the pace of recovery over coming quarters but anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets.
………The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate.
via FRB: Press Release–Federal Reserve issues FOMC statement–September 21, 2011.