I’m looking across my currency grid and am frankly amazed at the level of deviant behavior.
Yes, the grand Dollar slam has been a blast. But this can’t go on forever – granted, much longer than most FX bears would have thought, yes – but not forever. So let’s take a look at a few charts:
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I put together a little currency grid here to put things into context. If you look at all these FX pairs together you’ll recognize one particular theme: The upper 25-day Bollinger line is getting stretched like an Asian condom on a donkey. Also, on three of those six pairs we are actually trading outside the 100-day BB. Weakest of the bunch? Yes, you guessed it – the USD/JPY – and it seems it’s in the process of reversing. Which means that if the Dollar was in Federal Reserve penitentiary (which it is) and the Yen is the prison bitch then it may be about to get it up the rear from lowest on the ladder. Say hello to $4 at the pump – which in L.A. is closer to $5, we’ve been paying over $4 for several months now.
It’s impossible to know when exactly we’re going to see a reversal here but we’re getting close. It’s very rare to see the 25-d BB outside the 100-d BB for extended periods of time. That doesn’t mean we’ll see a huge reversal – no – but at least enough to bring things back into alignment.
Copper has knocked against its own Bollinger and may be bouncing back a little. If it does then that lower trend line needs to hold, or this formation may turn into a bearish flag, and that would be bad medicine. FYI – that line will probably meet the 100-day MA at that point, so that should provide some support. Again, if it doesn’t – down we go, and equities probably with it.
Since last night’s post the spoos have pushed below the current net lines sell level. A close below there would be bearish and may get us toward 1315 or lower. Let’s see if the longs can pull an EOD miracle but thus far I’m not seeing any buying interest.