Wednesday, 24 February 2016

A little look into currency land

Whilst US equities saw broad weakness, with the sp -24pts @ 1921, there continues to be some interesting currency moves. The USD unquestionably remains king of FIAT land, not least as the ECB and BoJ continue to print toward oblivion, with the GBP highly vulnerable to breaking the low of Jan'2009.

USD' monthly

Euro, weekly, 7yr


USD: despite what the 'dollar doomers' continue to proclaim - as some have done for over a decade, the USD looks set to remain the reserve currency of the world for years to come. The EU and Japanese economies look far weaker relative to the USA, and that only bodes bullish for the USD

Euro: much like the Japanese Yen, Chinese Yuan, and British Pound, the Euro looks highly vulnerable to further depreciation against the USD in the months ahead.

Key support for the Euro/$ is the March 2015 low of 1.0463. Parity against the USD looks a given.. it just seems to be a case of whether this year... or next.

There is absolutely massive resistance around 1.19/1.20. Under no reasonable outlook does sustained action in the 120s look possible.

What about the British Pound?

With PM Cameron recently announcing a referendum (Thurs' June 23rd 2016) to determine if the UK is to remain within the EU, the GBP continues to weaken.

Do I think the UK voters will see a majority vote to exit the EU ?

No. Despite increasing unrest, the UK populace still seem some considerable way from the point where a  majority want to further distance themselves from mainland Europe.

**The following chart does not include today's net change, as stockcharts don't update the GBP until the 12pm EST the next day.

GBP/USD, monthly, 20yr

What should be clear... the GBP has already massively cooled against the USD... and is now a mere 600bps away from breaking the Jan'2009 low of 1.3500. Under 1.3500, there really isn't much until.... parity.

Market/econ chatter from Schiff

Looking ahead

Wednesday will see PMI serv' , new home sales, and the latest EIA report.

*there are 3 fed officials on the loose, notably Bullard, but he is due after the close.

Goodnight from London