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Since my last post regarding the USD and oil relationship here I have been watching the USD with great interest. Problem is, I see the same pattern in two different time frames and they seem to conflict with eachother. I've added the Euro as a comparison.
Which direction will win out? For now, the channels are intact and the longer-term lines should be expected to hold until they don't. Together with the re-emerging bond market issues in Europe, I expect the USD to break out and the Euro to break down, but as always, we'll see. The Euro suggests that a break is imminent while the dollar looks like it could go another month before it has to break. Until they do, I imagine the equities markets will be choppy and a tad difficult to read. If you're an intermediate or longer term trader, it might be safer for capital to just sit tight until these markets show their hand.
With today's Fed announcement out of the way now, we see that no new Fed monetary easing programs are underway.
Instead, the U.S. is still left with this…their growing national debt. This is something that the Fed cannot solve…it's up to the politicians, and, still, I've heard nothing this year that leads me to believe that any part of this is being tackled. Instead, it seems to be the dirt that is lingering under the carpet, never to be dealt with until, perhaps, after the November election, or, perhaps, not at all.
With issues such as declining Durable Goods Orders and Core Durable Goods orders since 2001 and 2002, respectively, as shown on the graphs below (data released on Wednesday), declining consumer optimism, and housing numbers still at 2009 recessionary lows, I would have thought that politicians would have acted more responsibly to reduce the debt while finding measures to stimulate their economy.
Here on FOMC day I thought it would be appropriate since the Fed has the power to kick it into gear by pretending to be the guardians of sound financial policy for just one more meeting.
This could eventually drop markets to technical levels where the plan is activated for both my 'bottom feeder' preferred gold stock sector and for the broad markets.
Alternatively, if they go 'weak' today on top of the 'Apple relief' pump, you will know their level of desperation or intolerance of anything resembling a bear phase here in this US election year. In that case, bullish potentials could be activated sooner rather than later. The Fed is well aware of how tenuous the recovery born of inflation and credit really is.
I 'think' they are not going to blink today, but then again what do I know? Ben Bernanke is the academic genius with all the answers. His esoteric formulas on gauging the deflation threat may be telling him something different. Today should be interesting.
This chart shows the Au-SPX ratio, declining within a Wedge to support. Regardless of whether or not stock bulls have one more pump left in them, this is a bullish setup for a pro-gold stance, at least in relation to the stock market.