Looking at the long term USDJPY chart, one has to wonder what the next move will be.
1) Move further down to test recent low ..113.5
2) Swing at a higher level before 113.5
3) Swing at a higher level before 113.5 sucking in USDJPY bottom pickers, then swing down to 113.5 to break it causing capitulation selling of the longs of position traders.
4) Move up start of next week and not look back(highly unlikely), killing all the position shorts.
5) Sell off till FOMC, then swing up, sell on rumor, buy on fact.
Most FX traders know that the underpinnings of the dollar, interest rate hikes may be ending, and are assuming a dollar crisis will start. If everyone is on oneside of the trade and the mental thought process is fully conceptualized by many, that means that its already built into the price. What would confound everyone would be, a rally with the end of rate hikes. Killing everyone who relies on well known ideas and thought processes. The one thing that the USD has in favor of it is the geopolitical situation seems to be expanding to some degree.
Issues of focus:
1) War on terror
2) World economy : hard or soft landing?
3) Commodity Bull Cycle? or Bear?
4) ZIRP ending
5) Yuan revaluation
6) EURO, dollar substitute as proxy world currency
Is the war going to end? No...war is generally inflationary...
China/India...online integration into world economy...inflationary...
Commodity Bull Cycle....inflationary...oil/gold/commodities...
Russia...online integration into world economy...inflationary...Europe next door...beneficiaries of Russian expansion....
Japan economy turning around....ZIRP ending....
Rebuilding in Indian Ocean Basin....Tsunami aftermath...inflationary..
Rebuilding in Gulf of Mexico/USA...inflationary...
So what is fueling this talk of deflation?: More than anything it is a 'fear' trade, its when things look the worst and the pessimists want to convince you the world is about to end. And recently we had this occuring..
World Real Estate Indices taking a hit, that capital that was being used in speculation in world real estate markets will find another speculative instrument, and I believe it will be world equity indicies. There is a correlation between the price of GOLD/OIL and world equity indicies developing. So what is everyone waiting for? The fear mongers are spreading thought processes of world deflation, to capitalize on fear. I think we will see a huge move in world equity indicies. Short term it seems, we have to get over the tightening cycle of the FED, which is mainly going to halt to see reprecussions in collapsing housing market. As credit markets/bonds rally in anticipation of weak data, which we will get for a few quarters, that is all. We should see, consumers take root in other parts of the world to take the baton from the US consumers that fuel world ecnomic growth. In summation:
1)deflation
2)inflation
So what does that mean for USD?...USD strength first, then collapse... as inflation takes hold.
Bonds rally,....then collapse...stocks collapse...then rally..commdoties collapse.. then rally..
So if this is what is foretold, timing points have to be developed on the charts to drawout the future.
So post FOMC, we should see strong dollar strength for a few quarters...then collapse...as bonds collapse.....
Chris
1) Move further down to test recent low ..113.5
2) Swing at a higher level before 113.5
3) Swing at a higher level before 113.5 sucking in USDJPY bottom pickers, then swing down to 113.5 to break it causing capitulation selling of the longs of position traders.
4) Move up start of next week and not look back(highly unlikely), killing all the position shorts.
5) Sell off till FOMC, then swing up, sell on rumor, buy on fact.
Most FX traders know that the underpinnings of the dollar, interest rate hikes may be ending, and are assuming a dollar crisis will start. If everyone is on oneside of the trade and the mental thought process is fully conceptualized by many, that means that its already built into the price. What would confound everyone would be, a rally with the end of rate hikes. Killing everyone who relies on well known ideas and thought processes. The one thing that the USD has in favor of it is the geopolitical situation seems to be expanding to some degree.
Issues of focus:
1) War on terror
2) World economy : hard or soft landing?
3) Commodity Bull Cycle? or Bear?
4) ZIRP ending
5) Yuan revaluation
6) EURO, dollar substitute as proxy world currency
Is the war going to end? No...war is generally inflationary...
China/India...online integration into world economy...inflationary...
Commodity Bull Cycle....inflationary...oil/gold/commodities...
Russia...online integration into world economy...inflationary...Europe next door...beneficiaries of Russian expansion....
Japan economy turning around....ZIRP ending....
Rebuilding in Indian Ocean Basin....Tsunami aftermath...inflationary..
Rebuilding in Gulf of Mexico/USA...inflationary...
So what is fueling this talk of deflation?: More than anything it is a 'fear' trade, its when things look the worst and the pessimists want to convince you the world is about to end. And recently we had this occuring..
World Real Estate Indices taking a hit, that capital that was being used in speculation in world real estate markets will find another speculative instrument, and I believe it will be world equity indicies. There is a correlation between the price of GOLD/OIL and world equity indicies developing. So what is everyone waiting for? The fear mongers are spreading thought processes of world deflation, to capitalize on fear. I think we will see a huge move in world equity indicies. Short term it seems, we have to get over the tightening cycle of the FED, which is mainly going to halt to see reprecussions in collapsing housing market. As credit markets/bonds rally in anticipation of weak data, which we will get for a few quarters, that is all. We should see, consumers take root in other parts of the world to take the baton from the US consumers that fuel world ecnomic growth. In summation:
1)deflation
2)inflation
So what does that mean for USD?...USD strength first, then collapse... as inflation takes hold.
Bonds rally,....then collapse...stocks collapse...then rally..commdoties collapse.. then rally..
So if this is what is foretold, timing points have to be developed on the charts to drawout the future.
So post FOMC, we should see strong dollar strength for a few quarters...then collapse...as bonds collapse.....
Chris
Price is the only indicator.