Why I think the USD is heading much lower
Have you ever wanted to be the Fed
Governor – arguably, one of the most powerful people in the world?
Here’s a little simulation game that we have found amusing on this post US jobs
data afternoon.
https://www.iq-trader.com/University/FED.html
Control inflation and unemployment by adjusting interest rates
and hopefully by the time your term is done, your performance will be evaluated
favorably.
Play this game all day long but you won’t see a 5-year low in
the unemployment rate after 17 consecutive interest rate hikes. And if Bernanke
was jovial after having timed the inflation curve perfectly, chances are that he
is not smiling today.
So how do we justify today’s sharp decline to 4.4% – a figure
beyond anyone’s (bond market and FOMC included) expectations? Incompetence in
measurement at the Bureau of Labor Statistics is certainly a possibility, best
assessed by an immediate response from a futures trader quoted on CNBC this
morning: “If this country was run as a corporation, the executive would be
wearing an orange jumpsuitâ€. But if this really is an attempt to manipulate
public opinion heading into next week’s midterm election, whoever is behind this
not-so-subtle scam must be counting on one obtuse electorate.
We don’t buy this rose-colored view for a second and will look
to fade this dollar rally at the first hint of exhaustion. Having formulated our
analysis around the Elliott Wave Theory, today’s USD gains fit perfectly into
our wave count of an ABCDE type of consolidation followed by a wave (5) retreat
in the dollar index. Yesterday, we have prepared our subscribers for a dollar
rally on stronger than expected NFP. We have since taken profit on part of our
long position, tightened our stops to secure further gains on remainder, and
expect this wave to be characteristically short.
Jes
Black is the fund manager at Black Flag Capital Partners and Chairman of
the firm’s Investment Committee, which oversees research, investment and
trading strategies. You can find out more about Jes at
BlackFlagForex.com.
Prior
to organizing the hedge fund he was hired by MG Financial Group to help
run their flagship news and analysis department,
Forexnews.com. After four
years as a senior currency strategist he went on to found
FxMoneyTrends.com – a research firm catering to professional traders.