Hi TF, yes currency markets burning like Rome since mid July... just today in the past 18 hours the EUR/JPY has collapsed 4 big figures from 157.70 to 153.25...... The Euro has been so incredibly weak since the end of July and the real bombing of Dresden ie.. the EUR/USD fell off the table on August 7th-8th as Russia brought GeoPolitical risks into a market that was way too short the US. The EUD had a remarkable 90% correlation with Crude in the year ending July 8th.. which is almost perfect. No the EUD/USD and Crude have both just blow up since the July 2nd top in crude @ 147.80 or so.
It's widely apparent in the global currency markets that their is concerns of El-Erain's proverbial global economic collapse and/or more very massive blowups of major global banks and financial institutions. It's been obvious that global concerns of an unwinding of the carry trade have picked back up since the EUD/USD made it's double top near 1.60
and these concerns are growing more intense in nature.
The AUD has had the most remarkable decline that I've seen since the first year they floated it back in 1985-86.
The AUD peaked along with Gold on July 15th. The USD/AUD 98.49 high on 7/15/08 has been followed by a one way train wreck to 82.15 today. GBP/USD has really been getting destroyed as the financial engineering risk, Geopolitical risk and asset bubble risk has been exposed in the London global market place.
GBP/USD was at a corrective peak of 2.0135 again on July 15th and it has similarly imploded all the way to 1.7627 today. Truly remarkable. Remember sterling's multiyear bull market peaked back on November 9th of 2007 at 2.1162 when it became obvious that so much of Britain's growth and the currency's lure was based on the plethora of structured finance products such as SIV's .. Credit Default Swaps... CDO's multi currency variable products.
It's highly dangerous for global financial markets to be experiencing this extended period of extreme volatility and massive directional price swings. It's way too easy for banks, Investment Banks, Global Macro Asset Managers, Private Equity, Hedge Funds etc to get caught on the wrong side of several consecutive 4 to 6 standard deviation market moves and the panic and "hail mary" mentality that comes into play when trying to cut losses, make those losses back... and get the balance sheet looking better.
To answer your question, bigger trend changes in currencies do tend to take a period of many months and quite often a few years to turn... The USD made a type of S-H-S quasi triple top back during late 1999 into 2001. The EUR/JPY and the EUD/USD have been doing that for months on end as we came into this spring and summer.
I am really concerned about a few new major causalties becoming known in the very near future. The biggest risk is that we have a financial system counterparty systemic failure which can not be mediated by the existing FED, ECB, BOE, SNB, BOJ, RBA etc. And you have to wonder if Russia would like to see the West experience the type of blow up and default they experienced one decade ago. Russia will be looking for a bigger roll in a global economic rebuilding environment, as will China, Brazil and India.
these are very interesting times.
John |
