The Opening Bell: Where currencies start on Friday, August 5, 2011

The Opening Bell: Where currencies start on Friday, August 5, 2011

By Dan Bell

 

What a difference a day makes! The NZDUSD has lived up to the old cliché, “Up the staircase, down  the elevator!!”

What started with the BOJ selling 1 trillion YEN to buy USD and EUR, to prop up it’s export led economy, has continued into a massive sell off….

Dow Jones, S&P and Nasdaq all down over -4.0%, as Global growth concerns sink markets – Double Dip on??

Gold off $40 USD, Crude oil down $5, CRB Index -3.0%, VIX up 30%

NZDUSD now sub 0.8400 as typing, but should attract buyers… Who’s going to want to hold USD and EUR?

Treasuries have massive rally, 30yr up 20bps!!

NZDAUD 0.7980, NZDEUR 0.5930, NZDGBP 0.5145, NZDJPY 66.30

Makes tonight’s Non-farm Payrolls number even more important.. will it see the buyers back in? Either way, looks like a wild one on the cards…

 

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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here

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10 Comments

 More is down, then just the $ - when will we realise the severity of the problems ?

 The world is now entering a new phase. Accumulation and acceleration of problems on many fronts are confusing, often unpredictable and increasingly difficult to manage to satisfactory.

Here in New Zealand evidence of that is clearly demonstrated in parliament – random frustration coming from many parliamentarians/ departments and stupid political, “Election Kindergarten” (see here on this blog) seems more important, then cooperating - urgent needed, sensible solution findings.

 

The major problem: Looking into current developments on many fronts – the world will never recover again, simply because among the powerful in societies ethic and moral requirements and standards don’t prevail.

 

 We are probably not as the video from America suggest here in NZ, but certain elements do exist:

 http://www.youtube.com/watch?v=mS0IjrQViCA&feature=youtu.be

 Another short video, which shows how bad = corrupt it is in America this time in the dairy farming industry – hm  !

http://www.youtube.com/watch?v=KLnX8JbhIzc&feature=player_embedded

These kind of sell-offs occur all the time but don't mean we are getting another bear market. Look at April 2010 where the market fell massively. I bet that back then everyone was saying "the end is nigh"!.

Only time will tell if this is really a turning point for another bear market, or just a correction on the road to higher and higher values in  the NZD/USD and StockMarket. Nobody can pick the peaks and troughs of the market as they only become apparent in hindsight.

Some disagree "Chart of the Day: bear is back"  "...The most closely watched equity market – the S&P500 – which captures the broadest measure of US stocks, has completed a head and shoulders pattern (as noted earlier this week) and has broken its March 2009 weekly trendline.

This has been followed (horrifically) by the German DAX bourse and the UK FTSE (see Avid’s full post for all the charts)"

I agree it doesn't look good. But if you look at this chart you will see that we had a pretty horrific correction in 2010 that lasted from late April to early July.

http://www.google.com//finance?chdnp=0&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1312507937656&chddm=279578&chls=IntervalBasedLine&q=INDEXSP:.INX&ntsp=0

I guess we will have to see. The US could implement QEIII ... anything could happen. Personally though I would not bet the house on the stockmarket night now!

As you say, we shall see. But just one point of note - ( if your a chartist-personally I'm just an interested spectator on that subject) the break in April/July 10 of the Head and Shoulders pattern was..up from the trendline. This time it's down.

I used to be a chartist... but then I realized that they are only probability based, head and shoulders patterns fail all the time. That link I gave was bad.... try this one

What I think is interesting is that we are not far off getting a reverse "golden cross" where the 50 day SMA turns under the 200 SMA. However, if you look at 2010, again this happened and then the markets turned right around again and went up - a lot.

I personally think that the gains of the past 2 years have not been based off any fundamental reality, just expectations that things would get better. According to this article we are too early in the US presidential election cycle to get a bear market... I think there is some truth to this. If it looks like it is going pear shaped, say hello to QEIII so Obama can get back in!

A see saw ride, just hope the guy on the other end does not exit at the bottom, we could get a very sore butt. A good time to be free of debt, with a pocket full of gold.

The bankers have had their day in the sun, but fear they will not go quietly. Much pain and suffering ahead.