by Paul Kavanaugh
Ceteris Paribus
11/15/2009
Ceteris paribus
Commitment of traders data released Friday November 13th showed an increase in
positions betting against the US Dollar last week. Significant changes include increases
in long positions in Canadian dollar and Japanese Yen and a decrease in net short positions
betting against the British Pound for the first time in the last 4 weeks.
JAPANESE YEN (Contracts of 12,500,000 yen)
11/09/09 week 11/03/09 week
Long 42,044 39,028
Short 20,166 19,196
Net 21,878 19,832
EURO (Contracts of 125,000 euros)
11/09/09 week 11/03/09 week
Long 67,904 64,023
Short 42,731 41,832
Net 25,173 22,191
POUND STERLING (Contracts of 62,500 pounds sterling)
11/09/09 week 11/03/09 week
Long 28,677 25,102
Short 44,534 44,007
Net -15,857 -18,905
SWISS FRANC (Contracts of 125,000 Swiss francs)
11/09/09 week 11/03/09 week
Long 25,717 21,171
Short 2,419 2,506
Net 23,298 18,665
CANADIAN DOLLAR (Contracts of 100,000 Canadian dollars)
11/09/09 week 11/03/09 week
Long 30,168 27,862
Short 8,184 4,493
Net 21,984 23,369
AUSTRALIAN DOLLAR (Contracts of 100,000 Aussie dollars)
11/09/09 week 11/03/09 week
Long 54,402 55,825
Short 6,968 5,442
Net 47,434 50,383
(Source Reuters)
Retail sales will be the first key report this week, set for release Monday at 730am Central
time. According to Bloomberg, Retail Sales likely rose by 0.9% in October after falling
by 1.5% in September, based on the median of 66 estimates in the survey. Retail sales is a
monthly measure of consumer spending and is an important component of GDP. Unless we
see a larger than expected increase in Monday's report, it is likely that we will see continued
weakness in the US dollar as it tests the key 7500 support level.
Ceteris paribus is Latin for "Other things unchanged". Until we see significant signs that the
US economy is showing significant jobs growth and sustained economic growth, ceteris paribus,
the secular bear market in the US dollar is likely to continue. Look for opportunities to get short
the US dollar in the week ahead.
Paul Kavanaugh
888.439.6033
pkavanaugh@pfgbest.com
Paul Kavanaugh
PFGBEST Research Team
pkavanaugh@pfgbest.com
The Mother of all Carry Trades
11/8/2009
The Mother of all Carry Trades
Commitment of traders data released Friday October 30th showed an decrease in positions betting against the US Dollar last week to the lowest level since August 2009. Significant changes include a large decrease in short positions betting on the Sterling for the third week in a row and a decrease in net long positions in Canadian dollar.
JAPANESE YEN (Contracts of 12,500,000 yen)
11/03/09 week 10/27/09 week
Long 39,028 36,076
Short 19,196 18,546
Net 19,832 17,530
EURO (Contracts of 125,000 euros)
11/03/09 week 10/27/09 week
Long 64,023 67,843
Short 41,832 34,974
Net 22,191 32,869
POUND STERLING (Contracts of 62,500 pounds sterling)
11/03/09 week 10/27/09 week
Long 25,102 21,736
Short 44,007 53,167
Net -18,905 -31,431
SWISS FRANC (Contracts of 125,000 Swiss francs)
11/03/09 week 10/27/09 week
Long 21,171 24,104
Short 2,506 6,259
Net 18,665 17,845
CANADIAN DOLLAR (Contracts of 100,000 Canadian dollars)
11/03/09 week 10/27/09 week
Long 27,862 41,261
Short 4,493 5,806
Net 23,369 35,455
AUSTRALIAN DOLLAR (Contracts of 100,000 Aussie dollars)
11/03/09 week 10/27/09 week
Long 55,825 59,128
Short 5,442 6,241
Net 50,383 52,887
(Source: Reuters)
Too Early to Tighten
Treasury Secretary Timothy Geithner speaking at the conclusion of the G-20 meeting Saturday in Scotland said there was broad agreement that "Growth remains the dominant policy imperative across our economies", according to Reuters. 26 1/2 year high US unemployment, (10.2%), indicates it will be some time before we see any tightening of monetary policy in the US, making the US Dollar likely to see fresh new lows over the near term.
With the Federal reserve's stated intention to keep interest rates exceptionally low for an extended period, as long as inflation expectations are stable and unemployment fails to decline, the prospects for the US dollar to change its current trend, which has seen it shed over 12% of it's value since the Federal Reserve began buying $300 Billion in Treasury Bonds to push down long term interest rate in March 2009. This policy of qualitative easing increases the supply of dollars in the economy, with the intention of stimulating economic growth at the risk of creating inflation.
The Mother of all Carry Trades
Until we see evidence of significant jobs growth and sustained economic growth, we will likely see a continuation of global speculation using the near zero interest rate US dollar used to finance purchases of riskier investments, which will likely further exacerbate the US dollar's slide in what economist Nouriel Roubini termed "The mother of all carry trades" last week. Look for opportunities to get short the US Dollar in the week ahead.
US Trade Balance
The key report for the week ahead will likely be the US Trade Balance, set for release Friday morning at 730am Central time. According to Bloomberg News survey of 60 estimates, the gap between imports and exports likely increased by 31.8 Billion from 30.7 Billion in October.
Paul Kavanaugh
PFGBEST Research Team
pkavanaugh@pfgbest.com
Economic Growth Yes, But What About Jobs?
11/1/2009
Commitment of traders data released Friday October 30th showed an decrease in positions betting against the US Dollar last week. Significant changes include a large decrease in short positions betting on the Sterling for the second week and decreases in net long positions in Australian and Canadian dollars.
JAPANESE YEN (Contracts of 12,500,000 yen)
10/27/09 week 10/20/09 week
Long 36,076 49,401
Short 18,546 18,216
Net 17,530 31,185
EURO (Contracts of 125,000 euros)
10/27/09 week 10/20/09 week
Long 67,843 77,829
Short 34,974 41,796
Net 32,869 36,033
POUND STERLING (Contracts of 62,500 pounds sterling)
10/27/09 week 10/20/09 week
Long 21,736 15,644
Short 53,167 58,962
Net -31,431 -43,318
SWISS FRANC (Contracts of 125,000 Swiss francs)
10/27/09 week 10/20/09 week
Long 24,104 30,017
Short 6,259 6,164
Net 17,845 23,853
CANADIAN DOLLAR (Contracts of 100,000 Canadian dollars)
10/27/09 week 10/20/09 week
Long 41,261 52,689
Short 5,806 9,152
Net 35,455 43,537
AUSTRALIAN DOLLAR (Contracts of 100,000 Aussie dollars)
10/27/09 week 10/20/09 week
Long 59,128 62,429
Short 6,241 8,439
Net 52,887 53,990
(Source Reuters)
Last week the US GDP showed the economy grew in the 3rd quarter by 3.5%. Optimists may say this indicates the economy is emerging from the worst recession in 70 years, while others would point to the economic stimulus programs including "Cash for Clunkers" and the $8,000 tax credit for first time homebuyers which contributed to the positive GDP report last week as the reason for the gain, suggesting the economy may still struggle in the coming months.
Either way, it is highly unlikely the FED will make any changes in it's FOMC meetings Tuesday and Wednesday. Most analysts expect the FED to keep interest rate hikes on hold through mid-2010, according to Reuters News.
The Focus this week will be on the labor market, with initial jobless claims Thursday and October Unemployment due out Friday expected to show a new 26 year high unemployment rate of 9.9%. Payrolls fell by 175,000 last month, deepening the "Worst employment slump since the 1930's", according to Bloomberg News. Until we see significant progress in the US employment situation, the FED will likely continue in it's current monetary policy of near zero interest rates and qualitative easing, therefore the secular bear market in the US Dollar is likely to continue.
Look for opportunities to get short the US Dollar and long the Australian and or Canadian Dollars this week. Keep an eye on this report or contact us directly at 1-888-439-6033 for new recommendations!
Paul Kavanaugh
PFGBEST Research Team
pkavanaugh@pfgbest.com
There is a substantial risk of loss in trading futures and options.
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