With multiple reports of USD shortages including the need for an emergency Fed swap line in September why is it not showing in the DXY? Is the DXY to the USD what the paper market is to the precious metals?
Put yourself back in September 2008. Fannie Mae was bailed out on September 8 followed by Lehman, AIG, etc through September 22. Over that period the DXY falls 5.6%. Think traders were scratching their heads wondering why the USD was so weak? Where’s the fear? Is the USD as a safe haven trade dead?
Fast forward to 2011 and the USD
You need to be logged in to see this part of the content. Please Login to access.
No Responses
Tony, dumb question, but is PT A the MF Global bk? PT A doesn’t seem to be labeled on the chart
Yes current price action is same as Pt A. Chart was too messy to add that text.
Was thinking more about the ZH post and the jump in foreign reverse repos. During the period of September 8-22 is when interbank lending froze up and confidence disappeared. The result is a liquidation of US assets to raise cash and repatriation of those funds causing the 5.6% selloff in the USD. Then reality hits as traders see what had transpired during that period as we are seeing today. Similar selloff in the USD and treasuries until recently. Would explain the weakness in the USD in both fall 08 and now preceding the ramp higher. This is all starting to come clearer and the dots are getting connected.
Makes perfect sense as to why there is such a large divergence between TNX and HYG/SPX – and regardless of where SPX goes the divergence isnt getting smaller! Now all we have to do is wait for the market to wake up to this, which shouldn’t be too long now.
ZH ran that story but it’s Fed and ECB public data so I am sure a lot of big firms are realizing how bad things just got and will get very defensive very fast. Also sounds like MF accounts are going to be liquidated in the coming days as accounts but not cash was transferred thus a margin call from the new broker. Grogan sent me that link on CNBC. Lots going on. People are way too complacent thinking this market will continue to grind higher. Sorry to say but I think it’s about to fall off a cliff and fast. The data is there for everyone to see. What ZH is talking about with reverse repos may sound complicated but take time to study it. While the bulls have been partying over 100 billion has moved out of the market and is sitting in cash. The system has in fact begun to shut down. This is not fear mongering or some trader talking his short book. This is real stuff happening now, regardless of what leaders want you to believe. They’re interest is in you keeping the system afloat. Wow, long comment. Be careful out there everyone. I sense being a short is a lonely proposition right now. I’m much happier being on the “wrong” side of the trade in the eyes of many. History has proven more than not that the majority is usually wrong. End of rant…
Morning Rob and Tony,
Read this from capital 3x yesterday. Not a very big fan but they seem so have a grip on this from a technical view.
http://www.marketoracle.co.uk/Article31341.html
Have a nice day gents
This might have something to do with the size of the rally – G20 working on more ways to distort the markets
http://online.wsj.com/article/SB10001424052970203804204577016554222191164.html
One word, China
A euro below 1.30 to the dollar starts putting real pressure on their exports. With current social tension running high, it’s the last thing they want. Plus helps then to diversify from dollar holdings.
Specifically vs the euro, forexlive has reported that many european banks are having to sell assets priced in dollars and their conversion to euros is putting a bid under the market. Makes sense.
DAX breaking down on export news.
Also Italian spreads….
http://www.zerohedge.com/news/italy-bund-spread-almost-back-450bps
Anyone have a link to live ES charts? I cannot access them and would really appreciate it!!
[...] Tony Pallotta of Macrostory looks at recent US Dollar weakness and sees comparisons to the bank failures circa 2008. [...]