the dollar

[hardnox]

DX breaking some major support on Fri. and sustaining that this morning.

As noted previously, that's actually a little bit positive stocks and comms near term.

What bothers me is that on the surface this shouldn't be happening. I won't bother to ponder why that might be, because I don't know and any speculation might bring a flock of angry flying monkeys down on me.

But.....the global economic spring that we're in- no major problems and stocks flying everywhere- won't last forever. There are obviously vast currency carry trades at the foundation of this thing and if they start to come unwound, so will it.

One wise fellow says watch JY 107 (that's forex, futures are inverse).

We'll see where we are in five years before offering any kudos. The coordinated efforts of global central banks have been remarkably effective. But typically a new set of problems emerge from each intervention, eventually.

[hardnox]

A simple equal leg measurement gets an objective of around 78 for DX which would be a big move from 104ish at the start of last year. Currently testing the 90 level. Dunno, but once in motion currencies tend to trend for a long while.

I guess something of that order would be positive commodities although don't expect a return of the commodity supercycle when vast amounts of money chased commodities via short dollar carry trades. Those only happen every 30 years or so.

I suppose at some point the Fed would feel more urgency to raise rates and support the dollar but my guess is they'll be late to act and stuff will already be starting to unwind, making it ineffective or counterproductive. The days when it was fun and easy to be a central banker are drawing to a close- of that part I'm certain.

I'll break my pledge made above and engage in some speculation. A long held pearl clutching exercise- particularly on the part of conservative economic/financial types- is the fear that the US dollar will lose global reserve currency status. History says it will some day. I'm musing that is possibly what's beginning here as the US disengages from the international institutions that it formed and led since 1946.

While that probably wouldn't be the catastrophe that some portray, it would likely serve as a permanent limit on future US influence in the world and mark the ascendancy of China. For farmers it might actually even be net positive but probably not for the majority of Americans.

For the folks who things are now run entirely for, it would just be another opportunity. They can move money around quickly to other currencies and instruments and even fly themselves to wherever on their jets.  While US companies might ultimately be worth less the incentives are now loaded to an extremely short term time frame- it is mostly just about getting the stock price up enough to cash the options in.