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Currency Speculations

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We're Living Interesting Times, More Interesting Yet to Come

Sun, Aug 26 2007, 16:30 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

In my letter to clients of Friday, August 17th - hours after the Federal Reserve's decision to cut the discount interest rate - I was writing:

'It would be wrong to make any kind of comments about the global markets - FX including - right now.
It's hard to balance the odds, nevertheless I still hope fresh bulls will be taking over in the global stock markets as well as the Yen cross pairs. That is, daytraders still buying time for longer-term players (as a matter of fact, 'opportunistic players' would be more correct than 'longer-term').'

Then, on Monday:

'I believe sellers have just lost the initiative in the global stock markets, the USD/JPY and the Yen crosses, as well as in the European currencies versus the US Dollar. If some congestion time develops from here, the Federal Reserve have just bought us time to decide what next.

I see the GBP/USD having room nowadays to advance to 2.01 - 2.03.'

I reinforced then my opinions on Tuesday (including in these FXstreet.com notes published on the same day), in my private letter adding as well some extra technical observations regarding few stocks constituents of the Dow Jones Industrial Average:

'My guess is, for the time being the global stock markets and the Yen pairs must be quite illiquid.

Anyway, I continue to assume buyers are slowly taking over in the stock indices and the Yen crosses. The European currencies have room to correct positively against the US Dollar. The situation in the USD/CAD remains strange, as a retest of July lows looks to me as a likely possibility.

Technically, out of the stocks which constitute the Dow Jones Industrial Average index, I believe Alcoa and Home Depot still show signs they may continue to appreciate in the days ahead. Another constituent, 3M, offered at the close last Friday - after the Federal Reserve's decision to cut the discount interest rate - probably the best buy signal.

I say these as some of the constituent stocks may give better clues than the index itself - let alone clear-cut technical observations in themselves.'

Writing on Wednesday that 'In the short run I'm keeping unchanged all my recent ideas about the global stock markets, Yen crosses, USD/CAD and the European currencies against the US Dollar', a new reinforcement came out on Thursday:

'In the big picture, I don't think a new wave of panic has just started out. What I'm seeing now in the early US transacting time could be only a short-term repositioning of limited trading interests.
I see a continuation of the last few days' congesting time as very likely in the short run - and for the time being I'm also keeping my latest, global market opinions intact.'


Since my Tuesday's FXstreet.com notes alone, the GBP/USD has soared 300+ pips. The EUR/JPY has surged for almost 500 pips. The pressure on the USD/CAD still points downward.
For the whole week, the Dow Jones Industrial Average gained about 300 points.

 
In an article that appeared here on FXstreet.com on June 5th, titled 'Rational Exuberance (revisited)', I wrote, 'We're living interesting times, more interesting yet to come.'

That was truly the forecast that really did count, alongside my words published here on July 21st, only 2 days after the major US stock indices topped out, '(...) for a wide range of financial markets across the board the clock is ticking, which I believe makes the times ahead some of the most interesting in many years.'

Published on  Sun, Aug 26 2007, 16:36 GMT