Most Popular
1. Dow Max Drawdown Bear Stock Market 2022 - Accumulating Deviations from the Highs - 21st Feb 22
2.Putin Starts WW3 in Ukraine, Will Use Tactical Nuclear Weapons, China Prepares Taiwan Blitzkrieg - 28th Feb 22
3.World War 3 Phase 1 - Putin WINS Ukraine War! - 25th Feb 22
4.INVESTORS SEDUCED by CNBC and the STOCK CHARTS COMPLETELY MISS the BIG PICTURE! - 10th Feb 22
5.Will There Be A 2024 US Presidential Election? - 3rd Mar 22
6.Gold and SIlver, Precious Metals Sector Is at a Terrific Buy Spot - 6th Feb 22
7.Why Putin Wants the WHOLE of Ukraine - World War 3 Untended Consequences - 6th Feb 22
8.Dow Stock Market Expected Max Drawdown 2022 - 19th Feb 22
9.Stock Market Calm In the Eye of the Inflation Storm - 4th Mar 22
10.M = F - Everything is Waving! Stock Market Forward Guidance - 7th Mar 22
Last 7 days
How Low Could the Amazon (AMZN) Stock Price Fall? - 19th May 22
Bitten by FANG? Clocked by Cryptos? -- 'Air Pockets' Everywhere - 19th May 22
Northern General Hospital Orthopedics Fractures and and Ankle Clinic Consultations Real Patient Experience - 19th May 22
Cathie Wood Goes All in on Teladoc, ARKK INSANE Noob Investing Strategy! - 17th May 22
This is Anything but Positive for US Housing Market - 17th May 22
What Should We Do If There Is No Fed Monetary Policy Pivot? - 17th May 22
All Possible Ways to Earn Free Litecoin - 17th May 22
How low Could the Amazon Stock Price Fall? - 16th May 22
Cathy Wood ARKK INSANITY There is NO Coming Back! - 16th May 22
NASDAQ 100 Stock Market LOWER LOWS & LOWER HIGH - 16th May 22
Sanctions, trade wars worsen US inflation - 16th May 22
AI Tech Stocks Earnings BloodBath Buying Opportunity - 14th May 22
Futures Contract – Trading Crude Oil With USO - 14th May 22
How to Get Kaspersky Internet Security for 80% Discount! Do not Pay Renewal Price! - 14th May 22
Sagittarius A* Super Massive Black Hole Monster at Centre of Our Galaxy REVEALED! - 14th May 22
UK Public Debt Smoking Inflation Gun - 13th May 22
What Happens When the Stock Market Dip Keeps Dipping? - 13th May 22
Biden Seeks Inflation Scapegoats; Gold Advocate Wins GOP Primary - 13th May 22
Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - 12th May 22
The War on Gold Ensures the Dollar’s Downfall - 12th May 22
Crypto Investors Stable Coins TERROR as Terra USD COLLAPSEs towards ZERO, Tether Next! - 11th May 22
INFLATION IS KILLING SILVER - 11th May 22
The Dominant Investing Theme of the Decade - 11th May 22
Is Bitcoin Headed to Zero? - 11th May 22
RECESSION RISKS 2023 - 10th May 22
The Future of the Dollar Seems So Bright It’s Blinding Gold - 10th May 22
Take Advantage When Markets Succumb to Fear - 10th May 22
How to Recognize a Less\ Than Obvious Opportunity (In focus: Corn) - 10th May 22
How to Ensure Financial Stability for Your Family - 10th May 22
The Stocks Stealth BEAR Market - 9th May 22
A Strengthening US Dollar Is A Double-Edged Sword - 9th May 22
Making Wise Investment Decisions - 9th May 22
Ways to legalize a Moving Company - 9th May 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

US Dollar and British Pound Update

Currencies / British Pound Sep 05, 2014 - 06:03 PM GMT

By: Jonathan_Davis

Currencies

First, a recap of what I said a month ago.  Full post here.

4 August 2014:

“So, the US $ is to collapse, so say the inflationistas, the gold bugs, the Anderson shelter types etc.


Yet the $ index, against a generally accepted basket of currencies, has failed to collapse for over 2 years and, indeed, is rising again, from multi year support.

This is the reason why the GB£ has recently been falling – not because of anything internal to the UK.

1.70/72 was 20 year resistance, apart from the extreme period of 2003-2007.  As I told clients, from 1.70/72 £ could rise further 20% or fall 20% to 1.35.  Falling so far. On verra.

The £ has fallen recently due to $ strength and has broken below rising support, since February.  It seems fair to suggest the break will hold.  Next support down at 1.63.”

Now the update:

The US $ (index) is in a multi year uptrend.  There is no getting round that fact, whatever your opinions of what ‘should be’.  The trend up started in mid 2011, paused for a very long 2 years and, indeed, may still be pausing ie moving horizontally.  Until it breaks up, sustainably, above 85 or below 78 it is pausing in the trend.

The fact is though it is approaching the top of the channel, since mid 2012.  So, there is a slightly greater likelihood of a reversal from around here than a continued rise up.  It would be easier for the market to stop at this resistance than break through.

The high RSI signifies overbought status.

However, longer term, unless and until the trend reverses the multi year uptrend of the US$ is the trend.  That is unlikely to be good for stocks and commodities.  Unlikely to be inflationary.  Likely to be supportive of deflation and government bonds.

As for Sterling vis-a-vis the US$, in the British press all and sundry are blaming a recent fall in the £ on a rise in support of Scottish Independence (on which I had something to say here.)   Nonsense!  The recent polls were last week.  A) The US$ started rising rapidly in June. B) the recent fall in the £ started over 2 months ago.  The fall in Sterling has NOTHING to do with the polls or potential for Scottish Independence.  Economics and Political Media. MEH!

Note, I said, on 4 August it seemed likely the first major support (and point for reversal back up) would be around 1.63.  That is where we are now.  It is no coincidence that it coincides with a potential reversal of the short term surge in the US$.  I told clients that a strengthening £, since last Summer, would not be immune to a generally strengthening US$ ie the £ was not uniquely strengthening and it would not continue to do so if the US$ started to rise.  That has proven to be correct.

That UK house prices are softening, the timing for a Base Rate rise gets put further and further back (Quelle Surprise!), that household earnings remain weak, that disinflation remains true etc etc these are amongst the reasons I have held the view that a strengthening pound was strange.  (As many things in the markets are.)

It is also noticeable that the £ has bounced hard off the very long term resistance of $1.70/72, as I pointed out previously.

What seems likely is a rebound from here and it may go back up to the $1.70/72 level again.  Whatever it does on the rally, that will be the retest of the $1.72 high.  If the US$ is to break up above 85 expect the £ to be lower than now in the medium term, whatever may happen in the short term.

Nothing in these articles can be taken as financial advice.  Neither Jonathan Davis nor Jonathan Davis Wealth Management will be held responsible for action taken or not taken from reading these articles.

We recommend investors seek bespoke advice before acting.

By Jonathan Davis

http://jonathandaviswm.wordpress.com/

25+ year veteran of the world of financial services, the last 10 doing the same thing under his own name.  We work with families all over the UK and in Switzerland and, indeed, on 2 other continents. If interested in our Wealth Management work, cast a glance at the firm’s website.

From time to time media folk call me and ask me to rant live or in the press.  JD in the media.

I don’t buy hype.  I don’t believe it’s the end of the world but I do believe, within a generation, the West will have no welfare state.  The maths don’t lie.  We’re toast.  It’s obvious if you think about it.

© 2014 Copyright Jonathan Davis - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in