On days that equities move lower the dollar will find buyers, and therefore will offer the chance to buy intra-day dollar based trades, and vice versa. The month of May has shown that unless global stock markets move higher the dollar index will be supported, and although not a long-term play, the long side of the Usd is offering trades on weak equity days. That can be seen in the trend on the majors; there is no point trying to fight a market that buys dollars for safety, even though it is on light volume. However, Wall Street trade on Monday confirmed that there are plenty of determined Usd sellers when equity markets are getting bought.
Our calls have been to get long-dollars with reduced lots, and tighter targets, but not to be looking to hold long-term TeamLFB Members said. It seems that the Federal Reserve will get its wish of a de-valued dollar in the long run, and long-term we are building into a short-dollar position, but fully understand that without positive equities the forex market will spin its wheels. Short-dollar trades will be looking to leave a percentage running, something that May has not allowed to happen because of the lack of equity buying.
The reason to be buying/selling the dollar against the majors, instead buying or selling the Japanese yen, or gold on weak equity days, is that the greenback will always reflect global trade and sentiment; until the euro grows enough to be used heavily as a Reserve, and until major oil producers accept Euro based payments as the norm rather than the exception, we will get better price action out of Usd based pairs on the days that equities are mixed.
The leverage used in paper gold is frightening, and shows us that bullion prices may have to stay pegged to the fractional policy that paper gold has created. There is something going on between global Reserve traders that smells, and until that is out in the open the amount of paper gold out there may impede hard gold's ability to move. We have however already reported that the real value of global central bank Reserve/Debt ratios puts gold up towards $5k an ounce, that is what it would be if money supply numbers are correct, and those notes were cashed. That is the ultimate in fiat banking.
The dollar will de-value whilst the Fed continues printing notes and bills, but with negative stocks the $ finds buyers. If gold breaks past $1000 the Usd could come under substantial pressure to de-value, and if that happens on positive equity days, the dollar could finally break 80.00 support on the dollar index. the Trade Team said.
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