Bernanke Speech 11/29/07

It looks like Bernanke has made it pretty clear from this last speech that rates are at least going down by .25 , possibly .50, in December.
So this in my opinion, I see the dollar going pretty much only one direction thru the end of the year and that is down. I think Eurusd reaching 1.5 is entirely possible now. There really is nothing holding it back with the future dollar weakness.

Any thoughts?

Just something that I have been tossing around in my head, but have not had a chance to fully articulate to myself yet.This may sound a bit nuts, but I think that this (poss cut of rate) may be viewed as a positive by the investor world and it may already be getting priced in.. usd/chf has moved 300 pips up in the last 7 days. Which is not normal for fleeing the dollar.

I would have agreed with that, except for the fact, that the vice chairman and Benanke himself in his speech last night made a about face in his statements regarding the consumer and the economy at large... I think this was a pivotal speech.

Strange is that currencies seem to have ignored this speech, unlike the stock market that is soaring from Asian open to the +150 jump in Dow Jones 15 min ago. Euro hovering around the daily open, for instance.

Definitely there are guys out there who know something I don't

Well for me, when I am thinking about interest rates and fundamental economic factors in general, I think more of a market direction, then the individual movments of a given time period. I am thinking this last speech has given an incentive for a stock market ralley thru the end of the year and also a general malaise to the dollar. Although I think any ralley in the stock market will be with low participation. After the first of the year, it's all up for grabs.

My only question would be, how much of the current weakness already accounts for those adjustments. When the fed lowers or raises rates it's never in a vaccum, they tend to raise, raise, raise... or lower, lower lower with long pauses inbetween raising and lowering; we never see raise, lower, raise, lower, pause...

This is why we often see very larger moves on the front of the initial raise or lower series, the market is factoring in additional action by the Fed. There will no doubt be a little reaction and some of it will just be short term noise but the current price likely has a 25bp cut factored in. 50 could move the market 75 (we won't see this) would be a major suprise and would definately shock the markets.

I don't think 1.5 is even a question; we neerly tagged it over the holiday and a touch of it or an outright break is well withing our current volatility, especially if you look out at the longer time frames (weekly etc).

Here is the question I have... It used to be that everyone got very nervouse when the dollar tanked; it made it difficult for foriegn countries to sell to the US who has historically been a major importer of goods. The dollar tanks and it becomes harder to buy those goods, so the "world" often suffered and you would occasionally see countries step in and "adjust" to bring currencies into a more balanced state. With China and India's economies zoom zooming along, there may be adequate demand for those foriegn goods elsewhere... Is there still as much pressure now to avoid a $2.0000 EUR/USD or does it matter less now?

Technically I think the EUR/USD is do for a breather; I think the last month of this year and first quarter of 08 will either be flat overall or see the EUR/USD sell off... But thats not based on much more than my special coin flip and very few of us can actually trade long term moves like that, just too much volatility...

Even though rates are going down, possibly even in a dramatic fashion, some people are speculating that this action by the Fed could potentially help prevent the economy as a whole from tanking more than it would if the problem were not addressed.

If that is the case (that the economy can be set back on track), then a stronger U.S. economy would actually serve to assist the dollar, as counterintuitive as it sounds in terms of USD vs. Interest Rates.

If the subprime problems persist and are much more widespread than expected at this moment then that line of thinking will not help the USD.

Any thoughts?

Personally I sold EURUSD twice this week and will try to see if I can do it again next week.

I believe all the talk from the officials is nice and all that, but as I posted over in NTFX's thread: how on earth can anyone interpret any of this stuff anymore?

I mean - USD strength, yes? Robustness of an economy and nation. Crisis hits, people step in, rescue the stock market, take measures to ease the hit and reassure everyone they WILL do everything they can to feather any fall and ease any pressures. And tadah, it seems to do something, no?

What I mean is - the belief that the USA is not lost might weigh just as much as people poring over yield differentials. Or not. Who on earth can tell?

This is my point - FA is all nice and well, but you can spin it any which way if you just want to. Bit like statistics and data sources. You can make anything say anything.

Where you can't do that is on the chart(yes I'm telling THAT old tale again - I still don't think it's a bad thing to trade the chart). That said sell, I sold and I will sell again until it says buy.

I do believe that after hitting spot X (which I will try to plan for on my chart as well) we have a good chance of getting another / a last? rally to hit that marvelous 1.5 everyone is so hungry for. Perhaps.

We don't HAVE to right away. No hurry. I think the biggest risk of reading Bloomberg day in and out - I've done this the last 14 days now to see what it does to me - is that you find so many reasons for everything at once and every pip on Oil, Gold, Stocks, EURUSD suddenly gets post-justified and things interpreted, reinterpreted and re-reinterpreted...but you always get a "reason tag".

Well, it's just confusing, and what is a LOT worse - it's usually in 90% of the cases post mortem.
That is - "x ROSE (past!!!!! tense, movement already over, then someone slapped a journalist so he'd write it up and earn his pay) because of y, which caused people to think z."

Great. Now I know why something in the past may or may not have happened. I mean, I could write a really good story about this sack of rice in china and butterflies and this really cool scientific idea that this caused USDJPY to suddenly appreciate the merits of > 110 prices again. Which could just as equally be true. I mean - as long as I write it AFTER it happened, who KNOWS what the direct causation was? I just have to put it before the chart movement on a linear time scale of events, that's it.

Or I could just check and see that indeed that ancient trendline got slightly pierced on momentum(personally expected 108 already to do this, but heyyy, things were busy falling), caused price to stall and shoved it on back up again.
Dito GBPCHF. And so forth.(Come on smjones, you like TLs, too!)

I think those speeches(Kohn and Ben) were probably interesting and guiding to a lot of people and a lot of nice articles came out due to it/them.

But I much prefer different reasoning(Merlin's logic over in that one article where he mentions his brother or similiar) when thinking about USD strength aside from the chart.
Such as how one sided the bet has become when every analyst flying to whereever exchanges cheery stories about his short USD position.
Or when even my Mom thinks that now might be a good time to swap EUR into USD to get a bargain on the next holiday trip.
Etc.

That sort of "time trigger" - because it feels more directly connected with speculative interest to me - feels a lot nicer than all that who said what in public speeches stuff.
It makes a lot of noise and commotion - and then the first reaction of EURUSD is a 200+ pip drop.

If Monday let's the USDX close at / near / above 76.50(another 50-70 EURUSD pips should do it), then this USD death story could be over faster than a lot of people can say "wossatwheremystopgoomgthisisfallingsofastwhathappenedthiswasnotsposedtodropdarnitnooomyYTDfigureallruinedagainnonononotagainarghhh".

At least for another few hundred pipperoonies more than most would have expected. (My EURUSD monthly charts have a LOT of room to the downside before "real" actual TLs and s/r come in again and there are so many nice potential stop losses pooled along the way I bet ;p)

I think that the "post new year" rallies (direction as of yet unclear) are some of the more interesting things to see =)
I will be monitoring things very closely come 2008 =)

So excited to see how the story on stocks, carry and USD "ends"

P.S. Just saw JFX also took up the stronger USD argument I mentioned along the way(back on track logic), coolies.

P.S.2: Not a trade recommendation. I will just as soon cheat on USD bulls as on bears. Guerrilla warfare, highest bidder and all that Phil told me

P.S.3: Sometimes, my charts, they talk to me.

Did saw his coments on cnn, and the coments about slow down in us and uk,..and how europe is not effected,...true indeed,...about the dollar,...for his coments to influence big on currency market,..hm, ye ofcourse,..but if the market is multy net long on eur/usd, and since futures expirations are few days ahead,...i can and will interpret it, as a seeking liqudity,...untill fresh buy,..which is i think few days after rate cuts,...to me it sound,...like dont push it to much up,...we wont it to go down,...we need that cant u see that our growth might be hurt,...and meanwhile he and his felows are closing longs...:.....about the eur/usd,...1.4666 will act as no-mens land i guess,...
and i do agree we will break 1.50,...i dont see any real resistance till 1.66...where this should end?, but to go long purely on his speech, while falling like a knife,...no thanks,..i will for few pips,...or i will play range,...thanks

DE123

No offense intended whatsoever, but I had a lot of trouble understanding your post with the misspellings and interesting grammatical techniques.

My apologies if English is not your native language! The only reason I mention it is because I think it important to have everyone's insight as clear as possible

Cheers

no problem,..was talking about the relation about the dolar and his speech,...empaty was included a little bit, and my view was added,...so if u read it a couple of times,..u will understand it,...it is not the first language,... i am sorry if u find it hard to understand,...what i try to say is,...dont buy evrything u "see on cnn",...its too easy to win,..so it shouldnt work, making money is not easy...thats it...

Yes, I agree that a speech is not a trading signal. that is what I said here

If One had done that yesterday, they would have lost money. However, I think the fundemntals are like the terrain and eventually the market will follow the terrain. Of course I am not prediciting the market, No one is capable of doing that with any consistency, I am more forecasting a strong probability based on my opinion of what will happen with rates in December.

BTW, It looks like Kroszner is saying about the same thing after his speech yesterday and now Paulson with his ideas about intervention, of home loans and freezing rates. I think that is the worst thing I have heard for a while. I say let the credit crap work itself out. It is not to the government's job to solve these sorts of issues.

http://www.federalreserve.gov/newsev...r20071130a.htm
http://money.cnn.com/news/newsfeeds/...e3d6888804.htm

This is a good one. Gentle lowering of rates will encourage the stock market, but only until the next round of poor results and target-lowering trading statements. Depending upon who is buying into American stocks it could send the dollar up. It is difficult to predict this, the banks are in a bad way and it will take a while to find out just how bad.

I used to think "so what", and then I heard that stocks trading was suspended for an hour one afternoon in October (?) because there was not enough liquidity to allow the LSE to clear transactions. Central banks have been feeding the money markets but inter-bank lending is withering and inter-bank 1-month and 3-month rates are heading up to record heights again.

Sub-prime is about to bite in the UK. Today this warning from Clive Briault, retail managing director at the Financial Services Authority, that "domestic borrowers are likely to come under strain in 2008, with many unlikely to be able to refinance their home loans at attractive terms -- and some unable to do so at all". Apparently there are around 1.4 million mortgages that come up for re-financing in 2008. This week RBS issues a trading statement; they have been ominously silent about any exposure to packaged debt.

So here is another question; if the US economy is headed down, and the UK economy is about to follow, then China and other Asian economies will lose some market volumes - but will the remaining money move into the Euro?