Ugly Currency

A bit more volatility in the markets today, well at least in the US stock markets with the Dow losing almost 120 points by the closing bell. Equities had gains earlier but everything took a tumble around the 1:00 hour. Fresh reports of warfare in the Ukraine is the headline for the turnaround in stocks today. My opinion, the market simply looks tired up at these levels. Yesterday could have been a great start to the week with the numbers out of China and it was not. Today we had existing home sales that were the best since May of 2008 and consumer confidence the best since January of 2008! Huge numbers and the market rolled over. There goes a saying, when a bull market does not react to good news, the bulls should be worried and the same goes for when a bear market gets negative news and the market does not go down, the bears should beware! It goes something like that, you get my point, I can only hope.

Alright, now to the currency markets and I have to talk about the US dollar and then the Euro in particular. The dollar rallied this morning a tad, and I do mean a tad considering the headline numbers but the rally did not last. The Euro dropped about 40 pips and the Yen about 30 pips only to reverse those losses by the end of the trading day. I am going to post a chart on the US dollar, this is a weekly chart.

I posted the weekly to see the bigger picture of what it really looks like at the current time. From late 2013, it is safe to say that the US dollar has been in a very tight range between 8150 at the very top and 79 at the bottom. There are or were a lot of people looking for the dollar to rally this year, with good reason of course with the FED finally TAPERING and the almost every other Central Bank thinking or actually being more accommodating with monetary policy to support their economy. The Dollar rally has yet to take place and I am not so sure that it will based on what I have been watching with the markets.

Please take a look at the Euro weekly chart below.

Last year when I was writing, the Euro was just above 130 during this time. During the credit crisis, there were calls for the Euro to trade below parity, in some cases the Euro's existence came into question. A couple of weeks ago the ECB cut interest rates and has offered to do their own QE in the future, yet the Euro has not broken below 135. Based on what I see when looking at this chart, I see upside potential. I don't want to get into making predictions here, the market can certainly go either way but based on the circumstances and what everyone else is expecting, it seems to me that the US dollar looks like its in trouble.

I could go on and on about the dollar but let's just see how it plays out. The only way I see a rally in the US dollar is if we get some type of crash in global equity markets which is absolutely possible at any time, and panic takes a hold of the FREELY traded markets. I will leave you with one more weekly chart and this is of the US 10 Year Note. The talk has been for rising rates here in the US, this chart may say otherwise! I will get into this hopefully tomorrow.

If your trading, be careful out there, I think we might start to see a bit more volatility!
Be Safe and thanks for reading
TraderMartin