Dollar/New Year

Discussion in 'Forex' started by Spectre2007, Dec 25, 2006.

  1. Looking to the coming year. From a macro perspective. The US economy as everyone is saying is going to slow down, and they are blaming it on housing. Its almost as if a whole bunch of people are trying to wish it to happen so their bets become profitable.

    When you look at the overall markets, where do we stand. The dollar broke out of ranges to the downside versus european pairs over Thanksgiving. The dollar is not as weak in terms of asian currencies. Some manipulation to keep asian pairs weak is at hand. The initial spike down in USDJPY to 114.40 in hindsight was a great deal to take the risk to jump in.

    Given 1) European Strength 2) Asian Weakness = GBPJPY EURJPY continued trends to push up. A lot of trend followers are in these pairs, and they seem to be being rewarded at each juncture.

    Looking at the 10 year note yields they bottomed out at 4.4% and are now at 4.6%, if the economy is really weakening the ten year notes should be testing the lows on the yields. A lot of mixed data has come out, manufacturing continues to weaken yet spending seems to be strong. Everyone is waiting for the consumer to throw in the towel yet the macro bears, are being frustrated.

    The stock market seems to be meeting some resistance up above. With companies warning of future shortfalls, recently FEDEX, in the transport sector. With the low volatility and trend up, there were rumors that the stock market is being sustained, by the administration. A lot of equity bears have been handed their heads over the past few months with just in time buying to save the market.

    The commodities markets are indicating a economic slowing. Industrial metals. Oil sustaining its 60 dollar plus level, Gold sustaining 600 dollar plus level. These two markets may be indicating dollar bearishness, rather then economic strength indicators. Tensions with Iran still exist, but whether the administration will want to open a new can of worms is suspect.

    Looking at the global picture, on a yearly basis, European currency strength is here to stay. But trading in the ranges, before another attempted breakout to the upside is the most probably thing. GBPUSD to 1.9450 EURUSD to 1.3050. USDJPY to 120. Once the federal reserves is percieved to be willing to cut rates, then further testing of the upside can occur. GBPUSD 2.0, EURUSD to 1.35 USDJPY to 114 or lower. The bond market is indicating interest rates movement to either side have stabilized for now. Meaning that they will be range bound between 4.4-4.6 on the ten year note. Stock market weakness may surface with further earning warnings. If the Nasdaq cant maintain its 2400 level, then being short equity futures may be a profitable strategy.

    Do to debt of the US economy, it seems a weaker dollar trend over the long term is the clearest trend.

    Stock market weakness, dollar weakness, bond market strength, Oil and Gold strength seems to be what is in store for the coming year.