The Barbarous Relic

Keynes and others may have referred to gold as a barbarous relic, but many investors continue to track it.  In early January, we warned that gold appeared to be breaking out of a short-term bottoming pattern.

It had taken out a three-month downtrend line, which we suggested was part of a triangle pattern.  Gold also traced out a double bottom pattern.  The triangle pattern pointed to a move toward $1110 and the double bottom projected to around $1135.  The yellow metal poked through $1157 today and remains near it highs in late turnover.

The Pound Brushes off BOE Comments

Sterling has neared the 50% retracement of the 11.5-cent decline since mid-December.  It is near $1.4660.  After easing ahead of the BOE announcement, sterling sold to $1.4530 on the initial headlines that showed the BOE was cutting its growth, inflation, and wage forecasts.  However, the short-sterling futures had already largely discounted the rates being low for longer, and UK debt instruments also sold off, and after the initial flurry, sterling stabilized and recovered nearly fully.

Japanese Government Bonds May no longer be Retail-worthy

The Bank of Japan surprised investors by introducing negative rates last week.  Leave aside the fact that the negative rates do not go into effect for more than another week, and even when in effect, will apply to a relatively small amount of deposits at the central bank.  The important point is that it is another central bank to introduce negative rates. 

When a Safe Haven is not a Safe Haven

The yen is the strongest currency today.  Many are still referring to it as a safe haven.  However, this strikes us as a misuse of the concept.  Investors are not flocking to the yen to find quiet place to ride out the storm.  Rather the yen's strength is a reflection of the turmoil.

Futures Update: BOJ Surprise Edition

The latest CFTC Commitment of Traders report covers the five sessions through January 26, the day before the FOMC concluded its two-day meeting and three days before the BOJ's announcement.  Speculators hardly changed their positioning during the period.  There were no gross position adjustments that we would call significant (a bar we set at 10k contracts). 

Currencies Advance Against the Dollar but Want More Data

There is a mixed tone in the global capital markets today.  Asian shares were mixed with declines in the Nikkei (-.07%) and Shanghai (-2.9%) being offset by modest gains elsewhere.  European bourses are also mixed and the Dow Jones Stoxx 600 is off slightly.  European bonds benchmark bond yields are lower though US yields are firmer.

Outback with the Aussie Dollar

This Great Graphic, composed on Bloomberg shows a potential head and shoulders bottom pattern in the Australian dollar.  The left shoulder was set in the first part of the month near $0.6930.  The head was carved out in four sessions around the middle of the month a cent lower.  The right shoulder was created over the past two days, with yesterday's spike to $0.6920, before staging an impressive recovery. 

The Markets Have You Down? Blame Anchoring Bias

It has been a shaky start to 2016 for global stock markets, with substantial falls across all international markets, followed by some weak rallies.

The overall decline has been partly blamed on the price of crude oil, which is hovering around US $30 a barrel down from $100 over a year ago, along with market fears on the overall health of the Chinese economy.

Teetering Around the Dollar Totter

The latest Commitment of Traders report that covers the four sessions through January 19 saw speculators anticipating the continuation of the current moves.  Of the sixteen gross positions we track, only five were in reducing exposures.  Last week there were only six increased exposures. 

With the benefit of hindsight, we know that something changed a day or two after the reporting period ended.  Given the magnitude of the reversal in some cases, some of these late positions were likely forced out. 

Currency Snap Back as Buyers Take a Stand

The first two and a half weeks of the New Year saw persistent selling of equities, commodities, and emerging markets.  In the foreign exchange market, the dollar-bloc and sterling were crushed.  The yen was the single biggest beneficiary, and speculators in the CME are net long the yen in the futures market for the first time since late 2012.