Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

USD, Yen and an ‘Inflation Trade’ Update

Currencies / US Dollar May 02, 2016 - 12:10 PM GMT

By: Gary_Tanashian

Currencies

The Fed has been trying to promote inflation. That is not the guy with the tin foil hat speaking, it is direct from FOMC statements targeting a higher inflation level, which is another way of saying they are targeting a lower US dollar level. From this we leaned toward that which would benefit from a declining USD. Precious metals (led by silver) are a prime beneficiary, with oil and some commodities remaining firm despite pressure on stock markets as corporate performance and economic signals continue to fade.


Interestingly, the Bank of Japan played a big role in the ‘inflation trade’ last week as Kuroda signaled, temporarily at least, that it was the US’s turn to devalue in the global game of currency Whack-a-Mole in which BoJ was a star figure for so long. In one week, the US Fed rolled over and played dead (again) and the Bank of Japan surprised markets by refusing to intensify its ongoing inflationary operation.

One wonders how well coordinated these policy bodies are. Recall that while BoJ and ECB were softening global investors up to the idea of globally pervasive negative interest rate policy (NIRP), the US Fed was (in my opinion) pretending to be a beacon of sound policy in making a pathetic move of +1/4 on the Fed Funds Rate. Now that Goldilocks has long-since left the story, the Fed can pop its head up and promote inflation itself, with the BoJ mole standing down. Here is a chart of JPY/USD overlaid with gold and silver…

All 3 went up last week as policy was beneficial. Gold bugs and commodity gurus may rail against the Fed but as of now and ever since USD/JPY topped out and began a downtrend per our weekly chart, the Fed has been on their team. We are finding out now just how significant this change to the macro backdrop actually was.

Yet an even bigger picture view injects some caution about the idea of continued USD decline vs. Yen. It is nearing a support zone in the 100 to 105 area.

Let’s retreat to our old monthly USD-Yen analog chart created a few years ago. In this macro chart we speculated about the H&S top sending Yen on a similar journey to the USD [of last decade] and after something that felt like an eternity, Yen finally bottomed at the equivalent of USD’s late 2004 low, which sprung a bounce. The target for Yen is approximately 98 if it gets through S/T resistance. The target for USD, if it loses current support (2015 low) is around 89.

Silver, which gets gold bugs excited when it runs like it is currently, is picking up on US dollar weakness and making a jail break. Here I would remind you of the weekly silver chart we reviewed in Friday’s update [post is still subscriber-only as of this writing], showing very key long-term resistance for silver.

The ‘inflation trade’ rally [or at least this leg of it] is maturing rapidly. As we will review once again in the next segment, the next upside target for HUI is now loaded but risk is rising with the precious metals complex and the ‘inflation trade’ as it always does during a euphoric upward burst in any market. If for example, HUI were to hit the upside target (gold stocks are not about inflation, fundamentally) while USD and Yen hit their targets, extreme caution would be advised. As it is, caution is now advised generally speaking.

Subscribe to NFTRH Premium for your 25-35 page weekly report, interim updates (including Key ETF charts) and NFTRH+ chart and trade ideas or the free eLetter for an introduction to our work. Or simply keep up to date with plenty of public content at NFTRH.com and Biiwii.com.

By Gary Tanashian

http://biiwii.com

© 2016 Copyright  Gary Tanashian - 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.

Gary Tanashian Archive

© 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

6 Critical Money Making Rules