• 367 days Will The ECB Continue To Hike Rates?
  • 367 days Forbes: Aramco Remains Largest Company In The Middle East
  • 369 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 769 days Could Crypto Overtake Traditional Investment?
  • 774 days Americans Still Quitting Jobs At Record Pace
  • 775 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 779 days Is The Dollar Too Strong?
  • 779 days Big Tech Disappoints Investors on Earnings Calls
  • 780 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 781 days China Is Quietly Trying To Distance Itself From Russia
  • 782 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 786 days Crypto Investors Won Big In 2021
  • 786 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 787 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 789 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 789 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 793 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 794 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 794 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 796 days Are NFTs About To Take Over Gaming?
  1. Home
  2. Markets
  3. Other

The Signal and the Noise

To put it mildly, there are some interesting kinetics developing in the currency markets these days. And although the Monday morning pundits will point to XYZ to fit their respective bylines, the truth is these currency moves - the euro, Aussie, the US dollar to name a few; have been building for quite some time. We should know, we have eagerly watched their potential energies build beneath the surface. It is why we had expected a binary environment in the currency and commodity markets - as tensions built in momentum and relative strength divergences and lulls in historic correlations. With considerable process to interpretation - rather than reaction, we find ourselves driving the train rather than colliding with it.

A few things to consider here:

  • We would caution against relying on oversold RSI readings, sentiment and COT reports - to position mean reversion strategies in this kind of environment. Look no further than the recent action in the Japanese yen and the precious metals miners for examples of the inertia behind these moves. You typically find strongly oversold conditions develop on an hourly and daily basis and replicate through to the weekly measure over time. To a degree, we expect similar dynamics to develop in silver, gold, the euro and the Aussie over the coming weeks.

  • Of the previous two (2) occasions where the euro:US dollar index exhibited a pronounced drop in the historic correlation - the return trip to "normalcy" was commensurate to the size of the "signal". Both occasions marked exhaustion for the euro - and the asset river that runs through it (see Here). Also, on both occasions (8/08 & 9/11) silver failed quite dramatically over a relatively short timeframe.

  • Downstream, we expect the ledge support for the euro extending from November 2005 - to fail in this decline and add further downside momentum to the move.

Euro vs Silver
Larger Image

2008 Euro vs 2013 Euro
Larger Image

A Miirrored Pivot 2011 Euro vs 2013 Euro
Larger Image

 


* All chart data initially obtained from www.stockcharts.com and subsequently rendered by Market Anthropology.

 

Back to homepage

Leave a comment

Leave a comment