A widely anticipated US dollar rally is caught between the proverbial Horns of the Bull, leaving the dollar in grid-lock. Meanwhile, the mainstream media turns up the volume of their cries of market woes – just as the decline pauses for a breather.
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Economic IndicatorsWorld Indexes
Forex Rates
Commodities
In This Week’s Calendar
Sun 24 January
Japan Trade Balance (expected: 0.08T previous: 0.00T)
Mon 25 January
German Ifo Business Climate (expected: 108.5 previous: 108.7)
Tue 26 January
US CB Consumer Confidence (expected: 96.6 previous: 96.5)
Wed 27 January
US Crude Oil Inventories (previous: 4.0M)
US FOMC Statement
US Federal Funds Rate (expected: <0.50% previous: <0.50%)
Thu 28 January
UK Prelim GDP q/q (expected: 0.5% previous: 0.4%)
US Unemployment Claims (expected: 281K previous: 293K)
Fri 29 January
Japan BoJ Monetary Policy Statement
Making The News
The CBoE and CFTC release weekly summations of the speculative positioning of various classes of market participants. This week we consider the currency commitment of traders with an eye to understanding the pushes and pulls on the US dollar.
Commitment of Traders
The British pound is currently being traded short in the largest such market position since March of last year. According to the CFTC, the market’s gross short sterling position currently stands at 76.4k contracts.
The gross short Australian dollar speculative position stands at 81.7k contracts – up a third since the start of 2016.
The Japanese yen gross short position was a whopping 113k contracts in November 2015, but has reduced to only 46.8k contracts by the end of last week.
The largest market gross short position is held against the euro which has been above 200k contract since last November.
And with all these short positions stacked in favor of the US dollar, where is its elusive rally? According to analyst, Marc Chandler:
It is helpful to conceive of the dollar as not the mover presently but the fulcrum, with the dollar-bloc, and sterling on one side and the euro, yen and Swiss franc on the other.
The biggest forex winner this year was theMexican peso which made a low on 21 January and staged its biggest rally in 10 months on 22 January. Surprisingly, participation was thin compared to other currencies with the gross long peso position at only 30.4k contracts. As always, the market fools the majority, and rewards those who speculate away from the crowd.
Also In The NewsMarket Decline Takes A Breather
According to Reuters, there was “nearly $8 trillion wiped off world stocks in January”.
“Europe on the verge of collapse: Soros” –CNBC
“Profit warnings hit crisis-highs as market turmoil wracks UK” – The Telegraph
And just as the media clamor reaches a fever pitch of gloom, the market rout seems to have paused for a breather.
At the time of writing, oil has climbed back above $30 a barrel and US stocks posted a recovery during end-of-week trade, last week.
The next phase, if it is indeed an interlude to decline, will be characterized by denial andmarket irrationality. Stocks and commodities will be perceived to be in “recovery”. However, the apparent market recovery will merely be a bear market rally – up in a correction, or a “B wave” as it is known in Elliott Wave parlance. During a B wave, the market corrects (in apparent recovery) but a B wave is ultimately followed by a devastating wave C to new lows.
It is unclear whether bitcoin price will follow the general market in the price pattern described above. For now, bitcoin does indeed seem to be unfolding a large corrective pattern – with lower lows to follow before June. However, based on the chart’s behaviour during Greek and China troubles in 2015,bitcoin tends to rally when market fear is greatest. Additional price forecasts will be posted as they become apparent.
Final Thoughts…
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