Saturday , July 20 2019
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Tag Archives: $SPX

Near-Term Dollar Outlook: What the Charts may Say

The dollar had a challenging week.  The Chair of the Federal Reserve confirmed as much as possible a rate cut at the end of the month. The market understood this as a validation of its expectations and pushed the implied yield of the January 2020 fed funds futures contract down six basis points to 1.715%.  The low, and what we have suggested is peak dovishness, was 1.555% on June 20. As the central bank meetings are awaited later in the month, the most likely near-term scenario may be...

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Dollar Underpinned by Ideas that the Fed has more Room but less Urgency to Cut

Some naysayers who insist on cursing the thorn instead of being inspired by the beauty a rose find something or other to fret about in the June employment report that easily exceeded expected job growth and was the best since January.  It succeeded in doing what several regional Fed presidents were unable to do, and that is to force a reassessment of the likely trajectory of Fed policy.  The yield of the January 2020 fed funds futures contract, which is among the best metrics for...

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Will the Greenback Return to Favor if Peak Dovishness is Passed?

The US dollar was little changed in the first half of June but fell out of favor in the second half as the market became convinced the Federal Reserve will begin cutting rates in late July and follow it up with two more cuts in H2.  Given then the world's largest economy continues to expand above trend, with unemployment at a historic low, and financial conditions supportive, it is difficult to envision the market discounting a more aggressive Fed than it has.  According to a recent...

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Greenback Breaks Down

The US dollar fell against all the world's currencies last week. Although most of the G10 central banks have what can be considered easing biases, the dollar is most vulnerable because there is so much more scope to ease and its strength had been in no small measure predicated on monetary divergence.   It is striking that the dollar did not rally although geopolitical tensions are elevated.  The half dozen ship attacks in the Gulf in as many weeks, the US apparently was closer to a...

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USD Resilience in the Face of Aggressive Fed Easing Expectations

News that despite the disappointing jobs growth and weaker earnings growth, the engine of the US economy--consumers--remain resilient helped lift the dollar, which retraced most if not all of the previous week's losses.  The dollar rose against all the major and most of the emerging market currencies.  The Mexican peso was the best-performing currency, gaining almost 2.5% in the aftermath of an agreement that avoided US tariffs.   The back-and-forth of the dollar and an improved...

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A Look at the Charts

The US dollar fell against all the major currencies last week, and the technical indicators warn the further losses are likely.  Market speculation that the Federal Reserve will be forced to cut rates more than once this year has strengthened.  It is outpacing the expectations that the ECB and BOJ will have to ease policy as well.  Canada's firmer data, including a surge in job creation, and Norway's shift to a less accommodative monetary stance, are notable exceptions.  The Bank of...

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Will US Economic Nationalism Continue to be Good for the Dollar, Yen, and Swiss Franc?

The US dollar rose against most of the major currencies in May as the tariff truce between the world's two largest economies broke down, and fears that it would weaken growth prospects further.  The resilience of the Japanese yen and Swiss franc, which gained 1.2% and 0,07% respectively against the dollar primarily reflected the unwinding of short positions that were used for funding the purchases of higher risk assets.  The euro extended its losing streak for a fifth consecutive...

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How Durable of a Dollar Top?

After pushing higher in the first part of last week, the US dollar reversed lower and saw follow-through selling ahead of the weekend.  The reversal saw all the major currencies but the British pound gain on the greenback last week. Although the ineptitude of Prime Minister May has weighed on sterling, the immediate reaction to her departure saw the pound fall as the risk of a no-deal exit rose.  As we discuss below, the technical condition warns that the corrective forces could...

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Cool Video: End of Tariff Truce Spurs Over Correction

The S&P 500 recorded a key reversal on May 1, and the end of the tariff truce ensured follow-through selling.  With today's early losses, it is off nearly 3.5% this month.   In my brief chat with Stuart Varney at Fox Business, I suggest that the stretched technical condition left the market vulnerable to a "buy in May and go away"  scenario.    There was some suggestion that comments by Atlanta's Fed's Bostic playing down a rate cut may have spurred some losses.  While this is...

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