Is there a sentiment extreme in the euro as the Fed looms?

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Quotable

“Why, sometimes I’ve believed as many as six impossible things before breakfast”.

--Lewis Carroll, Through the Looking Glass

Commentary & Analysis

Is there a sentiment extreme in the euro as the Fed looms?

The expectation for a dovish Fed tomorrow is likely one reason the US dollar has been hit so hard lately, and why the euro (the flip side of the dollar index) has soared.  But, there could be a surprise; or there could be a sell the news mentality as it relates to the euro—most of the news already in the price.  Either would fit given rising love for the euro which likely can be categorized as some type of sentiment extreme...READ MORE

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Specs increasingly bearish on yen. Are they wrong?

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Quotable

“Uncertainty is an uncomfortable position. But certainty is an absurd one.”

― Voltaire

Commentary & Analysis

Specs increasingly bearish on yen.  Are they wrong?

Based on the positioning in Japanese yen – US dollar futures, as measured by the weekly Commitment of Traders Report (COT), speculators are increasingly bearish about the prospects for the Japanese yen as you can see from the chart below:  

Net short positions for speculators has grown to 112k contracts based on the latest COT report; the biggest short positioning since late June 2015. 

Given the considerable weakness in the US dollar lately, likely because of the collapse of President Trump’s Agenda and ongoing re-rating of global central bank rate hiking campaigns relative to the US Fed, why would so many become bearish on the yen?  READ MORE...

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Revisiting the Mundellian Trilemma (Dilemma) & Emerging Markets…

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Quotable

““Anyone who spends too much time thinking about international money goes mad.”

--Charles Kindleberger

 Commentary & Analysis

Revisiting the Mundellian Trilemma (Dilemma) & Emerging Markets…

The Mundellian trilemma says policy makers can control only two of the three main variables in global finance, but not all three at the same time.

“…it is not feasible to have at the same time a fixed exchange rate, full capital mobility and monetary policy independence. Only two of the three may co-exist (according to the Mundel-Fleming logic),” writes Helene Ray, of the London School of Business, International Channels of Transmission of Monetary Policy and the Mundellian Trilemma

In fact, in the world where we live, reality has overwhelmed theory—the Trilemma has morphed into the Dilemma. Why?  It’s because global financial markets are inextricably linked through investing, funding, collateral, and trade flows to name a few.  These linkages create increasingly complicated feedback-loops which are not accounted for in modern neoclassical economics. READ MORE...

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Buy Commodities? Why? Well, because the stocks/commodities ratio says so…

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Quotable

“The most difficult thing in markets is knowing how to wait for a big move that you know is going to come.”

--Woody Dorsey

Commentary & Analysis

Buy Commodities?  Why? Well, because the stocks/commodities ratio says so…

Based on the Stocks/Commodities ratio chart we have been following and sharing for the last several years, it’s now time to start buying commodities; at least in a greater proportion to stocks.  Why?  Well, because the Stocks/Commodities ration just made a round trip and interestingly even the timing is symmetrical. READ MORE...

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US dollar getting hammered; the pound still an open question on the spread…

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Quotable

“I sneezed and lost sight of the skylark.”

--Yayu (taken from Zen in the Markets)

Commentary & Analysis

US dollar getting hammered; the pound still an open question on the spread…

062717 soros quote.png

Today, real world developments in the form of an extremely surprising bullish speech from European Central Bank President Mario Draghi triggered prevailing expectations in a very positive way for the euro—it is soaring against the dollar. READ MORE...

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