Saturday, December 7, 2013

Currency Trends to End the Year With

Can the GBP/USD be in an uptrend?
Will the AUD/USD continue to push lower?
Is it time for the EUR/USD to head back to the 1.21 level?
Could USD/JPY, and USD/CAD be trending up?
Why is the USD/CHF in a downtrend?

2:1 I should be looking at long signals for the Dollar Index based on a basket of currencies I follow, but I’m not. Most of my indicators and some longer framed trend-lines are pointing to at least a short period of a US Dollar selling environment.

On the other hand, I am seeing signs of US Dollar strength against the Australian Dollar [less industrial inputs sent to China], the Euro [with exceptionally high negative correlations to the Index], the Canadian Dollar [which has to mean something to do with Oil and other commodity exports], and of course the Yen [using fiscal and monetary tools to try and solve social and demographic problems.]

Supporting the unfolding trend in the Dollar Index, both the Great British Pound [inflation after austerity, and quantitative easing], and the Swiss Franc [closely mimicking the Dollar Index], are showing signs of strength against the US Dollar.

International monetary economic theory would suggest that the expected strengthening of the US Dollar against several of its counterparts could coincide with market expectations of a scenario  playing out where the cost of US Dollar (interest rates) rises. 

So at this point the pound seems to be singling itself out from the pack. As previously suggested, the Swiss Franc closely mimics the Dollar Index, so it merely affirms any directional bias of the Index at most given points in time.

My indicators on the Pound Sterling are suggesting a buying environment for the currency. Whether you make an argument for or against fiscal austerity policies in the face of loose monetary policies, the British economy is showing signs of possibly tracking back to some sense of normalcy, which bodes well for the currency over time.