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The USD pushed to multi-year highs despite the Fed’s massive stimulus – what’s going on here?

The USD pushed to multi-year highs despite the Fed’s massive stimulus – what’s going on here?

Published

4 years ago

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Source: Economic Events Calendar March 23 – 27, 2020 - Admiral Markets' Forex Calendar

DAX30 CFD

Selling pressure on the DAX30 CFD remained high over the last week of trading, despite the massive monetary stimulus from the Fed on March 15. It cut rates to 0.0%-0.25%, launched a massive QE program of USD 700 billion, and announced swap lines with global central banks to make sure that enough USD are available and cut reserve ratios for banks to 0.

The aspect, in regard to the swap lines, is especially noteworthy since the world has built an enormous pile of USD debt over the years (especially over the last decade with the massive Fed QE), where 12.8 trillion USD debt can be found in the books of banks around the globe. In the current global economic downturn (as currently seen), central banks around the globe are desperate for US dollar which can only be printed by the Fed.

In fact, this US dollar shortage will likely continue and force market participants to keep on dumping their Equity positions with the target to stay as liquid as possible.

That may also very well explain why the planned stimulus package potentially worth more than 1 trillion USD, including direct payments to Americans, didn't start a massive Short squeeze, but only had a limited impact on US Equities, and also on the highly positively-correlated German DAX30 CFD index. The ECB 'bazooka' on Wednesday evening also only saw a late reaction (if it was an reaction to the 750 billion Euro stimulus package at all, probably mainly technically driven).

That said, we stay bearish for the DAX30 CFD for the time being, still see a chance that European governments continue their discussions and probably make a decision on fiscal policy measures which could result in a sharper bounce against the region around 7,500/8,000 points.

While we saw the DAX30 CFD recapture the region around 9,150/200, which slightly brightens the technical picture and could cause a sharp bounce with stronger bullish momentum, resulting in a re-test of the psychological important region around 10,000 and probably as high as 10,250/300, bulls should stay very cautious: the next leg down may be similarly brutal, and push the German index even lower:

Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Daily chart (between December 5, 2018, to March 20, 2020). Accessed: March 20, 2020, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of the DAX30 CFD increased by 9.56%, in 2016, it increased by 6.87%, in 2017, it increased by 12.51%, in 2018, it fell by 18.26%, in 2019, it increased by 26.44% meaning that after five years, it was up by 34.2%.

Check out Admiral Markets' most competitive conditions on the DAX30 CFD and start trading on the DAX30 CFD with a low 0.8 point spread offering during the main Xetra trading hours!

US Dollar

While volatility remained elevated over the last week, not just in Equity markets, but also in the Treasury and forex markets, 10-year US Treasury yields made it back above 1%.

As a result, the heavily sold US dollar saw a revival, in fact, the USD Index Futures pushed significantly above 100.00 points and saw a massive squeeze on the upside.

While rising US yields potentially added to the squeeze higher, the main driver was probably one which points to more volatility and trouble especially in credit markets ahead.

In fact, the current high USD demand came from the latest emergency step taken by the Fed on January 15: after the Fed cut rates to 0.0%-0.25% and launched a massive QE program of USD 700 billion, the main focus seems to lie on the announced swap lines with global central banks to make sure that enough USD are available and cut reserve ratios for banks to 0.

The aspect in regards to the swap lines is especially noteworthy, since the world has built an enormous pile of USD debt over the years (especially over the last decade with the massive Fed QE), where 12.8 trillion USD debt can be found in the books of banks around the globe. In the current global economic downturn (as currently seen), central banks around the globe are desperate for US dollar which can only be printed by the Fed.

That said, we conclude that at least short-term the demand for USD should stay high, despite the massive monetary stimulus from the Fed, a technical target on the upside in the USD Index Future can be found around 105.00 points:

Source: Barchart - U.S Dollar Index - Weekly Nearest OHLC Chart (between January 2017 to March 2020). Accessed: March 20, 2020, at 10:00pm GMT

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Euro

Despite the massive monetary stimulus from the Fed last week, the Euro couldn't profit.

The reason for the drop back below 1.1000 might be from a combination of the stronger bounce in 10-year US-Treasury yields back above 1.00%, and by the fact that the foreseeable economic downturn in Europe similar to the 2008 financial crash wasn't yet countered by the outlook of a massive fiscal stimulus announced by European governments, and the massive monetary stimulus announced from the ECB on Wednesday evening, as well.

In fact, the ECB went "all in", and launched a 750 billion euro emergency bond purchase scheme in a bid to stop a pandemic-induced financial rout from shredding the euro zone's economy.

But in our opinion, the main driver for the US dollar higher respectively the selling in the Euro can be found in the shortage of USD liquidity in European markets which was resolved by the Fed decision on March 15, where it was decided to reinstate the swap lines with global central banks to make sure that enough USD are available and which were actively used from the ECB over the last week.

As mentioned in the USD section above, we could imagine this strong US dollar to continue and keep the selling pressure on the EUR/USD.

With the first break below 1.0750, a further drop in the EUR/USD as low as 1.0500 and probably even lower stays a serious option.

On the other hand, we still expect the yield differential between US and European bonds to continue to converge, seeing a push above 1.1500 probably even higher in the mid-term:

Source: Admiral Markets MT5 with MT5-SE Add-on EUR/USD Daily chart (between January 21, 2019, to March 20, 2020). Accessed: March 20, 2020, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of the EUR/USD fell by 10.2%, in 2016, it fell by 3.2%, in 2017, it increased by 13.92%, 2018, it fell by 4.4%, 2019, it fell by 2.2%, meaning that after five years, it was down by 7.3%.

JPY

Volatility in forex markets and US yields remained elevated over the last few days, and particularly in the highly yield sensitive USD/JPY.

Interestingly enough and despite the fear among market participants, keeping selling pressure on Equities high, the USD/JPY saw a push as high as 110.00 and even higher.

While one explanation is certainly the sharper bounce in US-Treasury yields back above 1.00%, in addition to that the massive USD shortage and re-installation of swap lines with global central banks from the Fed on March 15 may have added to the demand in the currency pair.

Still, taking a step back, we expect volatility to stay very high, seeing US yields under further pressure and thus favour the Short-side in the USD/JPY.

On the other hand, we remain very cautious in regards to overly-optimistic USD/JPY Short engagements. This is because we not only expect further strong USD demand given the USD shortage and usage of the re-installed swap lines of the Fed from the BoJ which could result in an ongoing squeeze higher and a test, probably even break of the region around 112.00/30.

In addition, the Bank of Japan will probably very aggressive in regards to a strengthening JPY given recent very bad economic data in regards to the Japanese GDP growth in Q4 and given the damaging impact on exports a too strong JPY might have.

That in mind, we should expect nearly any time verbal interventions from the BoJ, openly expressing concerns over instability in Japanese financial sector and economy, warning between the lines that an intervention from the BoJ might be on its way and keeping USDJPY solidly above 100.00.

Source: Admiral Markets MT5 with MT5-SE Add-on USD/JPY Daily chart (between January 9, 2019, to March 13, 2020). Accessed: March 13, 2020, at 10:00pm GMT

In 2015, the value of the USD/JPY increased by 0.5%, in 2016, it fell by 2.8%, in 2017, it fell by 3.6%, in 2018, it fell by 2.7%, in 2019, it fell by 0.85%, meaning that after five years, it was down by 9.2%.

Gold

The situation in Gold continued to stay very tense over the last week of trading.

While the picture in Gold, given the recent developments around the massive monetary stimulus from the Fed on March 15, remains, in the mid- to long-term, clearly bullish and a run above 2,000 USD seems only a question of time, short-term the picture stays way more complex and selling pressure on the precious metal is likely to persist.

As already pointed out in the US dollar section above, one of the key drivers of recent volatility not only in Equity markets, but also the massive selling pressure in classic "safe-haven" assets like Gold, resulted out of a credit crunch and liquidating everything to stay solvent.

In this regard, the swap lines which were mentioned in the Fed emergency statement onMarch 15 are to make sure that global central banks have enough USD come into play: the enormous pile of 12.8 trillion USD debt which was accumulated over the years (especially over the last decade with the massive Fed QE) and which now can be found in the books of banks around the globe, will likely keep the pressure on credit markets up and result in further liquidations, and also in Gold, in our opinion.

So, the drop in Gold during the financial crisis in 2008 where a deflationary shock resulted out of the credit crunch had a negative impact on the precious metal in the short-term, but seeing a massive move up from 2010 onwards could repeat this time again.

While mid- to long-term the mode in Gold stays bullish, short-term a drop below 1,440/450 USD would technically darken the picture, activating 1,250/260 USD as a first target:

Source: Admiral Markets MT5 with MT5-SE Add-on Gold Daily chart (between December 19, 2018, to March 20, 2020). Accessed: March 20, 2020, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of Gold fell by 10.4%, in 2016, it increased by 8.1%, in 2017, it increased by 13.1%, in 2018, it fell by 1.6%, in 2019, it increased by 18.9%, meaning that after five years, it was up by 28%.

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  1. This is a marketing communication. The analysis is published for informative purposes only and are in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  2. Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
  3. Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
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  5. Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.
  6. The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
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Spread & Containment

The Coming Of The Police State In America

The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now…

Published

3 hours ago

on

March 9, 2024

By

The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now patrolling the New York City subway system in an attempt to do something about the explosion of crime. As part of this, there are bag checks and new surveillance of all passengers. No legislation, no debate, just an edict from the mayor.

Many citizens who rely on this system for transportation might welcome this. It’s a city of strict gun control, and no one knows for sure if they have the right to defend themselves. Merchants have been harassed and even arrested for trying to stop looting and pillaging in their own shops.

The message has been sent: Only the police can do this job. Whether they do it or not is another matter.

Things on the subway system have gotten crazy. If you know it well, you can manage to travel safely, but visitors to the city who take the wrong train at the wrong time are taking grave risks.

In actual fact, it’s guaranteed that this will only end in confiscating knives and other things that people carry in order to protect themselves while leaving the actual criminals even more free to prey on citizens.

The law-abiding will suffer and the criminals will grow more numerous. It will not end well.

When you step back from the details, what we have is the dawning of a genuine police state in the United States. It only starts in New York City. Where is the Guard going to be deployed next? Anywhere is possible.

If the crime is bad enough, citizens will welcome it. It must have been this way in most times and places that when the police state arrives, the people cheer.

We will all have our own stories of how this came to be. Some might begin with the passage of the Patriot Act and the establishment of the Department of Homeland Security in 2001. Some will focus on gun control and the taking away of citizens’ rights to defend themselves.

My own version of events is closer in time. It began four years ago this month with lockdowns. That’s what shattered the capacity of civil society to function in the United States. Everything that has happened since follows like one domino tumbling after another.

It goes like this:

1) lockdown,

2) loss of moral compass and spreading of loneliness and nihilism,

3) rioting resulting from citizen frustration, 4) police absent because of ideological hectoring,

5) a rise in uncontrolled immigration/refugees,

6) an epidemic of ill health from substance abuse and otherwise,

7) businesses flee the city

8) cities fall into decay, and that results in

9) more surveillance and police state.

The 10th stage is the sacking of liberty and civilization itself.

It doesn’t fall out this way at every point in history, but this seems like a solid outline of what happened in this case. Four years is a very short period of time to see all of this unfold. But it is a fact that New York City was more-or-less civilized only four years ago. No one could have predicted that it would come to this so quickly.

But once the lockdowns happened, all bets were off. Here we had a policy that most directly trampled on all freedoms that we had taken for granted. Schools, businesses, and churches were slammed shut, with various levels of enforcement. The entire workforce was divided between essential and nonessential, and there was widespread confusion about who precisely was in charge of designating and enforcing this.

It felt like martial law at the time, as if all normal civilian law had been displaced by something else. That something had to do with public health, but there was clearly more going on, because suddenly our social media posts were censored and we were being asked to do things that made no sense, such as mask up for a virus that evaded mask protection and walk in only one direction in grocery aisles.

Vast amounts of the white-collar workforce stayed home—and their kids, too—until it became too much to bear. The city became a ghost town. Most U.S. cities were the same.

As the months of disaster rolled on, the captives were let out of their houses for the summer in order to protest racism but no other reason. As a way of excusing this, the same public health authorities said that racism was a virus as bad as COVID-19, so therefore it was permitted.

The protests had turned to riots in many cities, and the police were being defunded and discouraged to do anything about the problem. Citizens watched in horror as downtowns burned and drug-crazed freaks took over whole sections of cities. It was like every standard of decency had been zapped out of an entire swath of the population.

Meanwhile, large checks were arriving in people’s bank accounts, defying every normal economic expectation. How could people not be working and get their bank accounts more flush with cash than ever? There was a new law that didn’t even require that people pay rent. How weird was that? Even student loans didn’t need to be paid.

By the fall, recess from lockdown was over and everyone was told to go home again. But this time they had a job to do: They were supposed to vote. Not at the polling places, because going there would only spread germs, or so the media said. When the voting results finally came in, it was the absentee ballots that swung the election in favor of the opposition party that actually wanted more lockdowns and eventually pushed vaccine mandates on the whole population.

The new party in control took note of the large population movements out of cities and states that they controlled. This would have a large effect on voting patterns in the future. But they had a plan. They would open the borders to millions of people in the guise of caring for refugees. These new warm bodies would become voters in time and certainly count on the census when it came time to reapportion political power.

Meanwhile, the native population had begun to swim in ill health from substance abuse, widespread depression, and demoralization, plus vaccine injury. This increased dependency on the very institutions that had caused the problem in the first place: the medical/scientific establishment.

The rise of crime drove the small businesses out of the city. They had barely survived the lockdowns, but they certainly could not survive the crime epidemic. This undermined the tax base of the city and allowed the criminals to take further control.

The same cities became sanctuaries for the waves of migrants sacking the country, and partisan mayors actually used tax dollars to house these invaders in high-end hotels in the name of having compassion for the stranger. Citizens were pushed out to make way for rampaging migrant hordes, as incredible as this seems.

But with that, of course, crime rose ever further, inciting citizen anger and providing a pretext to bring in the police state in the form of the National Guard, now tasked with cracking down on crime in the transportation system.

What’s the next step? It’s probably already here: mass surveillance and censorship, plus ever-expanding police power. This will be accompanied by further population movements, as those with the means to do so flee the city and even the country and leave it for everyone else to suffer.

As I tell the story, all of this seems inevitable. It is not. It could have been stopped at any point. A wise and prudent political leadership could have admitted the error from the beginning and called on the country to rediscover freedom, decency, and the difference between right and wrong. But ego and pride stopped that from happening, and we are left with the consequences.

The government grows ever bigger and civil society ever less capable of managing itself in large urban centers. Disaster is unfolding in real time, mitigated only by a rising stock market and a financial system that has yet to fall apart completely.

Are we at the middle stages of total collapse, or at the point where the population and people in leadership positions wise up and decide to put an end to the downward slide? It’s hard to know. But this much we do know: There is a growing pocket of resistance out there that is fed up and refuses to sit by and watch this great country be sacked and taken over by everything it was set up to prevent.

Tyler Durden Sat, 03/09/2024 - 16:20

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Low Iron Levels In Blood Could Trigger Long COVID: Study

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate…

Published

7 hours ago

on

March 9, 2024

By

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate iron levels in their blood due to a COVID-19 infection could be at greater risk of long COVID.

(Shutterstock)

A new study indicates that problems with iron levels in the bloodstream likely trigger chronic inflammation and other conditions associated with the post-COVID phenomenon. The findings, published on March 1 in Nature Immunology, could offer new ways to treat or prevent the condition.

Long COVID Patients Have Low Iron Levels

Researchers at the University of Cambridge pinpointed low iron as a potential link to long-COVID symptoms thanks to a study they initiated shortly after the start of the pandemic. They recruited people who tested positive for the virus to provide blood samples for analysis over a year, which allowed the researchers to look for post-infection changes in the blood. The researchers looked at 214 samples and found that 45 percent of patients reported symptoms of long COVID that lasted between three and 10 months.

In analyzing the blood samples, the research team noticed that people experiencing long COVID had low iron levels, contributing to anemia and low red blood cell production, just two weeks after they were diagnosed with COVID-19. This was true for patients regardless of age, sex, or the initial severity of their infection.

According to one of the study co-authors, the removal of iron from the bloodstream is a natural process and defense mechanism of the body.

But it can jeopardize a person’s recovery.

“When the body has an infection, it responds by removing iron from the bloodstream. This protects us from potentially lethal bacteria that capture the iron in the bloodstream and grow rapidly. It’s an evolutionary response that redistributes iron in the body, and the blood plasma becomes an iron desert,” University of Oxford professor Hal Drakesmith said in a press release. “However, if this goes on for a long time, there is less iron for red blood cells, so oxygen is transported less efficiently affecting metabolism and energy production, and for white blood cells, which need iron to work properly. The protective mechanism ends up becoming a problem.”

The research team believes that consistently low iron levels could explain why individuals with long COVID continue to experience fatigue and difficulty exercising. As such, the researchers suggested iron supplementation to help regulate and prevent the often debilitating symptoms associated with long COVID.

“It isn’t necessarily the case that individuals don’t have enough iron in their body, it’s just that it’s trapped in the wrong place,” Aimee Hanson, a postdoctoral researcher at the University of Cambridge who worked on the study, said in the press release. “What we need is a way to remobilize the iron and pull it back into the bloodstream, where it becomes more useful to the red blood cells.”

The research team pointed out that iron supplementation isn’t always straightforward. Achieving the right level of iron varies from person to person. Too much iron can cause stomach issues, ranging from constipation, nausea, and abdominal pain to gastritis and gastric lesions.

1 in 5 Still Affected by Long COVID

COVID-19 has affected nearly 40 percent of Americans, with one in five of those still suffering from symptoms of long COVID, according to the U.S. Centers for Disease Control and Prevention (CDC). Long COVID is marked by health issues that continue at least four weeks after an individual was initially diagnosed with COVID-19. Symptoms can last for days, weeks, months, or years and may include fatigue, cough or chest pain, headache, brain fog, depression or anxiety, digestive issues, and joint or muscle pain.

Tyler Durden Sat, 03/09/2024 - 12:50

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Uncategorized

February Employment Situation

By Paul Gomme and Peter Rupert The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000…

Published

8 hours ago

on

March 9, 2024

By

By Paul Gomme and Peter Rupert

The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000 average over the previous 12 months. The payroll data for January and December were revised down by a total of 167,000. The private sector added 223,000 new jobs, the largest gain since May of last year.

Temporary help services employment continues a steep decline after a sharp post-pandemic rise.

Average hours of work increased from 34.2 to 34.3. The increase, along with the 223,000 private employment increase led to a hefty increase in total hours of 5.6% at an annualized rate, also the largest increase since May of last year.

The establishment report, once again, beat “expectations;” the WSJ survey of economists was 198,000. Other than the downward revisions, mentioned above, another bit of negative news was a smallish increase in wage growth, from $34.52 to $34.57.

The household survey shows that the labor force increased 150,000, a drop in employment of 184,000 and an increase in the number of unemployed persons of 334,000. The labor force participation rate held steady at 62.5, the employment to population ratio decreased from 60.2 to 60.1 and the unemployment rate increased from 3.66 to 3.86. Remember that the unemployment rate is the number of unemployed relative to the labor force (the number employed plus the number unemployed). Consequently, the unemployment rate can go up if the number of unemployed rises holding fixed the labor force, or if the labor force shrinks holding the number unemployed unchanged. An increase in the unemployment rate is not necessarily a bad thing: it may reflect a strong labor market drawing “marginally attached” individuals from outside the labor force. Indeed, there was a 96,000 decline in those workers.

Earlier in the week, the BLS announced JOLTS (Job Openings and Labor Turnover Survey) data for January. There isn’t much to report here as the job openings changed little at 8.9 million, the number of hires and total separations were little changed at 5.7 million and 5.3 million, respectively.

As has been the case for the last couple of years, the number of job openings remains higher than the number of unemployed persons.

Also earlier in the week the BLS announced that productivity increased 3.2% in the 4th quarter with output rising 3.5% and hours of work rising 0.3%.

The bottom line is that the labor market continues its surprisingly (to some) strong performance, once again proving stronger than many had expected. This strength makes it difficult to justify any interest rate cuts soon, particularly given the recent inflation spike.

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