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Forex or FX or off-exchange foreign currency futures and options trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. The tight supply means ICBC customers applying to change yuan for dollars on Tuesday have to wait four days to complete the transaction, rather than the normal one day, he said. Another person who works in retail banking at a leading Hong Kong bank in Shanghai said she estimates the amount of U.
These jams come and go, but Snider, who has been watching this dollar thing like a hawk for awhile, seems to think the magnitude of this latest liquidity crunch is an urgent warning for stocks. It is difficult to accept this level of fails as anything else other than a liquidity warning as all the prior versions had been And it's not like repo is the only indication of a desperate financial shortage.
In fact, that is the growing consensus among the deeper, internal eurodollar indications. From swap spreads to cross currency basis swaps to countries literally begging for dollars, they all point to the same imbalance - a dollar shortage. It seems yet another warning that the financial world is "on the clock" With a countdown already in place from whatever the PBOC had been doing in January and this very well could be related to that , it would be truly a bad sign if those clocks synchronized especially heading into the final two weeks of a quarter and the typical window dressing illiquidity space.
I would not be surprised at all if this surge in repo fails was the starter pistol firing to sound the beginning of dollar run 3. To illustrate what he means by "dollar run 3" I drew a comparison between some previous episodes of dollar shortages he graphs in his article and the related actions in the stock market.
I use the NYSE composite as a broader average and a lead group, as it peaked early in the present decline. Dollar hoarding looks to be a growing problem and very tightly correlated to the timing of severe stock market sell-offs. Bouts of dollar hoarding have precisely accompanied each of the two global stock sell-offs of our current downturn, not to mention the possible fore-shock to the bear turn back in October, Snider sees the late event as just that, a fore-shock.
He notes the rising dollar back then along with the top in a lot of markets - think CRB dropping off a 3 year plateau, European banks, the US transports. He pegged the October dollar hoarding run as "a clear warning sign". There seems to be a growing propensity for safe haven scrambles developing. And the rocketing repo fails shown above strongly suggest the aforementioned run 3 will be underway in the downward megaphone progression pictured above.
This megaphone progression has been the defining characteristic of every major US bear market since You can look at all seven of these cases in an article at my web site. Both our alarms sync together very well. We are approaching the upper reaches of the megaphone in what is probably a bear market rally, just as the most severe dollar crunch since arrives.
This all has a huge bearing on gold in that, in any flight to safety, massive amounts of money get divided between many things, but the USD and gold are the two main players. So it behooves us to consider the relative size of these two markets:. This pictograph clearly shows that, when there is a traffic jam in the dollar, it is a big traffic jam.
The sharp jumps in the gold miners we are seeing could have a lot of follow through.
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