Hodgepodge: EU/Oil/Aussie/Cad/Manias

Quotable

“The degree of certainty is a function of how good the edge is.”

Mark Douglas

Commentary & Analysis

Hodgepodge

EU Unemployment:

You’ve got to love this headline from Reuters this morning: Greek Unemployment Dips to 27%

Wow! A dip to 27%? Things must really be improving you might think. Until of course you read the first sentence of the story, “…dips to 27% from 27.1%.” If growth and yield are drivers for currencies over the intermediate-term (the Japanese yen excepted), then why shouldn’t the euro continue lower from here when you look at the numbers…

One major caveat here: Everyone seems to be expecting the euro to go lower. Thus, anyone with that view is firmly in the consensus. It doesn’t mean the consensus is wrong. But Mr. Market is watching and likely licking his chops.

EUR/USD Weekly:

Oil Prices:

I have a couple of friends who are always wringing their hands about fossil fuels. Of course they are big believers in those things which support their case: “Peak Oil”, manipulation of WTI prices in Cushing OK, Middle East conflict, and other such things; maybe even the ongoing fallacy of “global warming.” We all have our beliefs reflected against reality. Few of us let go of those beliefs when reality bites; that is what makes for nice price moves. [P.S. Another year and another dormant hurricane season here in sunny Florida. The place where Mr. Al “Rampant Hurricanes due to Global Warming” Gore told us would be ravaged by hurricanes. What a self-hyping moron!!! Hopefully, I am not tempting fate with that comment.]

So I always find it interesting when my friends tell me oil has now reached a permanent range peak and will never again go much below $100 per barrel (WTI). These friends seem to forget: 1) There is still plenty of oil out there to be had and the incredible advancement in drilling technologies and shale reserves seem to support that contention; and 2) oil is still subject, as most quasi-free asset markets are, to the laws of supply and demand.

WASHINGTON, Sep 9 (Reuters) – The U.S. Energy Information Administration on Tuesday cut its 2014 world oil demand growth forecast by 80,000 barrels per day to 1.04 million bpd.

LONDON, Sept 11 (Reuters) – Brent crude dropped to a two-year low below $97 a barrel on Thursday, falling for a sixth straight session as worries over mounting supply and weak demand outweighed concerns that conflicts in the Middle East could curb oil production.

We’ve been working off this chart for months now and it seems to be playing out nicely [the caveat is we were surprised by the big run in oil from mid-April to mid-June but believed the powers of global deflation and rising oil supply would sooner or later take precedence—it seems to be doing just that].

Aussie and Commodities Confirming Deflationary Pressures:

Our forex subscribers are feasting on this trade. We are short AUD/USD from 0.9354 on 9/4/14…and have about 240 pips and looking for more…they are also long USD/CAD from 1.0912 on 9/8/14….if these two trades keep running, they are the type of trades that can make up for a lot of sins.

AUD/USD versus Gold and Oil Daily:

USD/CAD Daily:

Good summary from Robert Prechter’s Elliott Wave Theorist this month:

Is the stock market the next shoe to fall? No comment. I have only been wrong there for about five years in a row.

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  • ForExchange

    Hi Jack,

    I always read your blog and like your charts. These are not the usual charts and we can learn a lot from it.

    I have some questions:

    1. In the real domestic demand and GDP chart we can see how the values move together for USD and diverge for EUR. Why is that for EUR? Do you have an explanation why the values do not move together?

    2. I use and analyse the COT report. Can you please say why you use the 1 year COT net positions for your analysis? Usually the 3 years data is used and there we are not at an extreme at all.

    Thanks and looking to read your articles in the future too.