The Great Currency Wars of 2015

87
Mon, Jan 5, 2015 - 11:10am

The new year begins with dysfunction and dislocation across nearly all major currencies. That gold and silver are holding up...though still hard capped at $1200...indicates that the physical supply breakage that we first discovered back in November continues to dominate the picture.

But let's start today with the currencies as we continue to see historic value swings. Recall that Raoul Pal warned everyone that stuff begins to really unravel at "a DXY above 90". Hmmm. What do we have today? I have a last of 91.48. Now, lest you think this is all dollar strength, let me remind you that the POSX is nothing but an index that compares The Pig to a basket of other fiat currencies. So, when the USDX (DXY or POSX, whichever you prefer) is rallying, it is primarily due to weakness in the other currencies.

As you can see, the makeup of the index is not evenly split among the fiat and the euro makes up more than 50%. And when you add in a euro-pegged Swiss Franc, the weighting exceeds 60%! So, when the euro declines, it has a rather significant, inverse effect on "the dollar".

And, boy-oh-boy, is the euro ever declining!! Here's a chart of just the past six months:

This decline can be attributed to a number of reasons but the most recent plunge is clearly related to the events of Dec 16-18. What happened then:

  • The most recent FOMC concluded with Fedlines construed to be "hawkish". Remember all of the "considerable time" vs "patient" nonsense?
  • Even more importantly, the SNB announced on the 18th that they plan to initiate a Negative Interest Rate Policy (NIRP) on January 22nd. What's so important about January 22? That's the date of the next ECB meeting. (https://www.zerohedge.com/news/2014-12-18/swiss-central-bank-scrambles-a...)

So, to me, it's quite clear that the "market" is anticipating the long-awaited ECBQE at the next ECB meeting and the euro is selling off dramatically because of it. Oh, there are certainly other factors in play here but, in the end, we must expect further euro weakness until January 22. What happens next will all be based upon whether or not the ECB begins the overt printing.

IF the euro starts breaking down through 117 and 116, ALL BETS ARE OFF and it's going to head considerably lower.

And, as stated above, with the euro holding a 60% basis of the POSX, that index is going considerably higher. How much higher? You tell me! If it takes out that 2005 high of 92.63, it looks like it could make a move on 100! And what did Raoul Pal say about DXY 90???

One last thing before we get to the metals...we have to mention crude. WOW! For weeks, we've been talking about the possibility of it going to and here we are! I have a last of .53 and a low of .30. If crude closes below that January 2007 low of .90, especially on a weekly or monthly basis, it's impossible NOT to think it's headed to . !!

Given the potential ugliness of all of this, I guess it's not surprising that the S&P is down 30 points and the bond market is soaring. I have a last in the 10-year of just 2.06% and the 30-year Long Bond is 2.62%. It's certainly nice to see the metals get a "safe haven" bid as well but I remain convinced that there's much more going on here than meets the eye.

Recall that gold reversed of off the 50 area back in November when the GOFO rates suddenly plunged to historically negative levels. Silver also seemed to find a physical floor at/near .50. And now gold refuses to go lower with the euro and the yen and if silver was still tracking crude, it'd be under .

However, a significant effort continues to be made to keep gold under 00. Note the red line at 00 and the red arrows pointing at the sharp down moves back and away from that level. Therefore, our primary short-term goal is simply a close above 00. After that, a close above 10. IF we can accomplish that, we can set our sights on slowly gathering momentum through 20 and then 40.

And there's a real battle in silver between .50 and .30. Which way this ultimately breaks will clearly set the tone for the early parts of this year. Given the firmness of the floor at .50, I very much like our chances of a break out and UP. However, given the infinite nonsense of paper silver, who can say for sure? However, if I'm right and a 2015 rally develops from here, we'll look back on the area in the blue rectangle and recall it as a pretty stout bottom.

That's all for now but please be sure to check back later today for a full podcast summary and review.

TF

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  87 Comments

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Dr. P. Metals
Jan 6, 2015 - 12:54pm

@abguy

please stop it with the Schultz thing =) it just totally cracks me up, no matter how many times I see it LOL

abguy4
Jan 6, 2015 - 11:53am

thirsting for some 2015 predictions?????

@ SafetyDan.

You slipped that J.H. Kunstler article in with tooo little fanfare. That's a tremendous article, and one with some amazingly insightful predictions. IF anyone is thirsting for some 2015 predictions, do not skip this article.

https://kunstler.com/forecast/forecast-2015/

Safety Dan
Jan 6, 2015 - 10:42am

Expert: Bank of America,

Expert: Bank of America, Goldman Sachs, Citibank, JP Morgan will ALL fail to insolvency this year — NO FEDERAL BAILOUT

International Finance Expert James H. Kunstler says in no uncertain terms that this year (2015): “Goldman Sachs, Citicorp, Morgan Stanley, Bank of America, DeutscheBank, SocGen, all succumb to insolvency.American government and Federal Reserve officials don’t dare attempt to rescue them again.”

He goes on to forcefully state:

“Bank of America is the first of the Too Big To Fails to enter the event horizon of failure. Obama can’t get congress […]

Opposing point of view???

G20 Rules Make Bank Bail-ins a Reality – Ellen Brown on GRTV

G20 Rules Make Bank Bail-ins a Reality - Ellen Brown on GRTV

​Today attorney, author and researcher Ellen Brown of EllenBrown.com joins us to discuss her article on “The Global Bankers’ Coup: Bail-In and the Shadowy Financial Stability Board.” We talk about the G20 and their rubber-stamping of the FSB’s proposed bail-in rules, what this shadowy body is and how it interlocks with the Bank for International Settlements, and what this means for depositors in the wake of the next banking crisis

https://investmentwatchblog.com/g20-rules-make-bank-bail-ins-a-reality-e...

Safety Dan
Jan 6, 2015 - 10:34am

CFR: Unvaccinated are

CFR: Unvaccinated are Healthier than Vaccinated Populations

Now, I’d like to discuss my interpretation of what the map represents:

Those countries where vaccines are given routinely or forced upon children and their parents, often under threat of law, experience the lion’s share of communicable diseases. Why? What’s happened with “herd immunity”? It just doesn’t add up, especially since in the USA there is over 90% childhood vaccination compliance! According to the U.S. CDC’s MMWR (Mortality and Morbidity Weekly Report) 2012—13 School Year for Kindergarten, for example,

This report summarizes vaccination coverage from 48 states and DC and exemption rates from 49 states and DC for children entering kindergarten for the 2012–13 school year. Forty-eight states and DC reported vaccination coverage, with medians of 94.5% for 2 doses of measles, mumps, and rubella (MMR) vaccine; 95.1% for local requirements for diphtheria, tetanus toxoid, and acellular pertussis (DtaP) vaccination; and 93.8% for 2 doses of varicella vaccine among awardees with a 2-dose requirement. Forty-nine states and DC reportedexemption rates, with the median total of 1.8%. Although school entry coverage for most awardees was at or near national Healthy People 2020 targets of maintaining 95% vaccination coverage levels for 2 doses of MMR vaccine, 4 doses of DtaP† vaccine, and 2 doses of varicella vaccine (2), low vaccination and high exemption levels can cluster within communities, increasing the risk for disease. [CJF emphasis added]

Read more: CFR: Unvaccinated are Healthier than Vaccinated Populations

Now for an opposing point of view:

Johnson & Johnson has started a trial of its experimental Ebola vaccine

I thought it was all under control… So why does J&J think they need to rush to market 2 million doses of this vaccine?

https://www.bloomberg.com/news/2015-01-06/j-j-starts-ebola-vaccine-trial-in-u-k-increases-output.html

Johnson & Johnson has started a trial of its experimental Ebola vaccine in the U.K., saying it will produce 2M courses of the shot this year. Drugmakers are racing against the clock to develop a vaccine against Ebola to curb an outbreak that has struck […]

Safety Dan
Jan 6, 2015 - 10:29am

The Breakdown Is Near: Oil

The Breakdown Is Near: Oil Derivatives Explode Early This Year, Wall Street Banks Could Be Facing Absolutely Colossal Losses, Qe4 Accompanied By Bank Bail-ins

Rob Kirby: “OIL DERIVATIVES EXPLODE EARLY THIS YEAR”

Gold and derivatives expert Rob Kirby thinks crashing oil prices are going to lead to a 2008 style financial meltdown. This is not a maybe–a market explosion is going to happen in 2015. Kirby contends, “Oh yes, without a doubt, it will. It must because the income crude oil sales generate are used to pay the interest on the debt. . . […]

Safety Dan
Jan 6, 2015 - 10:29am

‘Grexit’ Risk and Lehman

‘Grexit’ Risk and Lehman Collapse Concerns See Euro Gold at 1,020 Per Ounce

by GoldCore

With Greeks going to the polls to elect a new government in just over two weeks, concerns over a potential Greek exit or ‘Grexit’ from the euro is growing and this has led to the euro falling against the dollar and particularly gold.

Speculation as to the consequences of a Syriza victory has caused the euro to fall to it’s lowest level against the dollar since 2010. Gold […]

AlienEyes
Jan 6, 2015 - 4:29am

@ tyberious

""Between 1700 and 1940 Russia/USSR fought in 34 wars and won 31 and in 392 battle and won 279. We could say that Russia won 91% of her wars and 71% of her battles. Russia's opponents included: Swedes, French, Germans, Turks, Poles, Tatars, Finns, Caucasians, Japanese, Chinese, Austrians, Hungarians, British, Italians and Central Asians."

.

One can also rightly draw the conclusion that the Russians are drunken arse holes that can't get along with anybody. The Russians are so use to dictatorships that they see democracy as subversive.

The American citizens are armed to the teeth. The feds fear this and constantly try to suppress second amendment rights. What the Russians and Chinese are keenly aware of is that an invasion of the U.S. is suicidal. They must first defeat the worlds best military and then fight millions of partisans who would love to "bag the limit" of foreign invaders. This would also present a golden opportunity to cull the liberal / leftist / socialist /anti-American PC scum that infest our country. The bastards can't vote, steal or lie if they're dead.

AlienEyes
Jan 6, 2015 - 3:26am

JC, get a grip !

Once KGB, always KGB.

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ivars
Jan 6, 2015 - 2:47am

Lets see if this strange fork

Lets see if this strange fork holds now to the upside. If gold miners- possibly due to falling oil prices- are in green now, then gold prices first should make a dip then rise ( as costs go down, but raise with geopolitics =war in Ukraine). This all should play out pretty fast.

Blythesshrink
Jan 6, 2015 - 2:22am

DeaconBenjamin

Ditto. I don't always agree with Ivars, but that's healthy. I think he makes his case well and with politeness and it offers a different perspective on things.

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Key Economic Events Week of 7/13

7/13 11:30 ET Goon Williams speech
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7/15 8:30 ET Empire State and Import Price Idx
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Key Economic Events Week of 6/15

6/16 8:30 ET Retail Sales
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6/16 10:00 ET Chief Goon Powell US Senate
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6/17 12:00 ET Chief Goon Powell US House
6/18 8:30 ET Initial Jobless Claims
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Key Economic Events Week of 6/8

6/9 10:00 ET Job openings
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Key Economic Events Week of 5/25

5/26 8:30 ET Chicago Fed
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5/27 2:00 ET Fed Beige Book
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Key Economic Events Week of 5/18

5/18 2:00 ET Goon Bostic speech
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5/20 2:00 ET April FOMC minutes
5/21 8:30 ET Philly Fed
5/21 9:45 ET Markit flash PMIs for May
5/21 10:00 ET Goon Williams speech
5/21 1:00 ET Goon Chlamydia speech
5/21 2:30 ET Chief Goon Powell speech

Key Economic Events Week of 5/11

5/11 12:00 ET Goon Bostic speech
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5/12 8:30 ET CPI
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5/12 5:00 ET Goon Mester speech
5/13 8:30 ET PPI
5/13 9:00 ET Chief Goon Powell speech
5/14 8:30 ET Initial jobless claims and import prices
5/14 1:00 ET Another Goon Kashnkari speech
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5/15 9:15 ET Cap Ute and Ind Prod
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Key Economic Events Week of 5/4

5/4 10:00 ET Factory Orders
5/5 8:30 ET US Trade Deficit
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5/6 8:15 ET ADP jobs report
5/7 8:30 ET Productivity
5/8 8:30 ET BLSBS
5/8 10:00 ET Wholesale Inventories

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