A Short Squeeze Is Propping Up The Dollar…

And now… Today’s A Pfennig For Your Thoughts…

April 25, 2018

* The Indian rupee is worst performer..
* Gold finally sees some love and gains $5.60 on the day…

Good Day… And a Wonderful Wednesday to you! OOPS I did it again. UGH! I was up walking the floor after midnight, in the moonlight last night And once again I failed to obey the alarm clock. I think that this change in my MO is concerning to me, as I’ve never been one to just “let it be”… But maybe this semi-retirement I’m in, has caused this change in me… Oh well, The Strawbs greet me this morning with their Rock Classic song: Autumn…

Right out of the starters blocks this morning, I’ll tell you that the dollar continues to take no prisoners…. I read that it’s a short squeeze, that everyone an their brother was short dollars, and this short squeeze could end up being rock star status… That wouldn’t be good for the currencies, so we’ll have to wait-n-see just how far this short squeeze goes, eh? It won’t be over until it is, is the saying I used to tell the folks on the trading desk at m old place of business…

One of the worst performing currencies in recent weeks has been the Indian rupee… I mentioned the other day that a banking scam/ scandal was scaring investors here, and that remains, but there’s also this fear that the calm that fell over the Indian economy when Oil prices dropped, is going to reverse, now that Oil prices are moving higher again. So, if you own rupees I suggest you batten down the hatches, and wait for a sunny day to buy some more at cheaper prices, and if you don’t own any, you don’t care about any of this! HA!

A couple of years ago, when I was still sitting on the trading desk, I was talking with one of our dealer friends at Morgan Stanley, and I told her the next BIG problem for the U.S. was going to be a Lack of Liquidity, and she was very doubtful that a Liquidity problem was going to come upon us. But I pointed out that with the Fed in the markets every day, buying bonds (at that time) that there would come a day when the Fed stopped buying, and liquidity would begin to dry up…

I tell you this because there’s an article on Zerohedge.com this morning that talks about a liquidity problem showing signs of becoming the real deal… Let’s listen in… “As The Wall Street Journal recently noted, worsening liquidity comes as banks have reduced inventory of riskier assets and investors more closely track bond indexes, making it harder and harder to buy or sell when they want (let alone when they need)…

The liquidity problem has been worsening for years. Investors say it began nearly a decade ago, when post-financial-crisis regulation prevented banks from trading for themselves, and forced them to hold larger amounts of capital – thereby shrinking their inventory of riskier assets.

This, in turn, reduced banks’ ability to serve as intermediaries between buyers and sellers.” Chuck again… Crazy, eh? People as me all the time how I see these things happening long before they come to fruition… I tell them, I have no idea, for I use logic to form my thoughts, and logic told me years ago that if you have an entity buying large sums of bonds, and then stops buying, that you’ll have a liquidity problem… That, my friends is what you get when you read the thoughts of someone that has been around the markets for 45 years…

I know you’re saying, but he doesn’t look that old, right? HA! The price of Oil slipped downward to the $67 handle from the lofty $69 handle in the past 24 hours… I would imagine that there was plenty of profit taking going on here..

Gold finally saw some love yesterday, and was able to carve out a $5.60 gain on the day, to close at $1,329.80, after the dust settled on the 268,000 contract traded in the shiny metal. It’s a shame, the way the price manipulators keep playing this game of allowing Gold to run up to $1,350 and the whack it back down, and then rinse and repeat over and over again… One of these days, Alice! To the Moon! Ralph Kramden would know what to do with the “boys in the band”…

That’s an oldie but goodie, eh? The euro continues to get battered as the offset currency to the dollar when the dollar is rallying like this. But when things turn around… I’m just saying, which begs the question, should we be looking to buy some euros at these cheaper prices? I think we should probably wait and see where this short squeeze for the dollar goes, but when it ends, THAT would be the time to back up the truck, so to speak…

Beep, Beep, Beep… No, put it in park, we’re not ready to be backing up yet!

The U.S. Data Cupboard is empty today, but yesterday’s cupboard had the stupid Consumer Confidence report for April, and it showed a HUGE jump in the index number from 125.9 in March to 128.17 in April… Weren’t we talking about a possible Trade War this month? How could these people be so darn confident? I just don’t get it…

We also saw The Case/Shiller Home Price Index for Feb, and it grew 6.3%, and then the New Home Sales data printed for March, and showed that it beat the expectations by a large margin, showing that 694,000 new Homes were sold in the month, VS 630,000 expected… I thought that a month ago, there was all this talk that home prices were getting too high and driving away buyers.. Hmmm… I wonder what happened to change that?

Oh well, I’m not going to lose any sleep over the change, go ahead and go deep into debt with that house that cost a bazillion dollars and see how that works out for you when the next financial crisis comes along.. I’m just saying…

To Recap… The dollar continues to rally and now it has been revealed that there is a short squeeze going on, and how long it will continue to go on is the $64 question this morning. Higher Oil prices aren’t helping the Indian economy any, and the rupee is getting sold as a result. Gold finally saw some light and was able to gain $5.60 on the day yesterday, but the euro and the price of Oil slid downward.

For What It’s Worth.. When the Shanghai Gold Exchange began trading Gold in 2014, I said then that it would eventually change the way Gold was traded and priced… Well, this article catches that spirit, and can be found here: https://www.chinadailyhk.com/articles/20/163/245/1524473885382.html

Or, here’s your snippet: “Led by China, the global gold market has moved from the West to the East, the CEO of the World Gold Council, Aram Shishmanian, told an industry forum on April 19.

And building on that position, China is assuming leadership in the world of gold, he said at the Global Gold Market Summit 2018 in Xiamen, East China’s Fujian province. “Your leadership, I have no doubt, will determine or help determine the structure and form of the evolving international gold market.”

The summit, the third of its kind, was organized by the Shanghai Gold Exchange (SGE) and the Xiamen Municipal People’s Government and gathered about 700 industry heavyweights and professionals from across the world.

Shishmanian noted that China was small in the gold industry 20 years ago but has gone through “spectacular transformation” – the result of a “very careful and deliberate strategy” supported by the People’s Bank of China (PBOC), the central bank.”

Chuck Again… Whoever didn’t see that China would take this all over eventually once they put their collective minds to it is blind as a bat! Well, maybe not that blind, as there are investors out there that continue to believe that China’s Communist spirit will overtake this capitalist movement… I guess we can always have a little fear of that happening in the back of our minds, but not allow it to come forward!

Currencies today 4/25/18… American Style: A$ .7575, kiwi .7087, C$ .7767, euro 1.22, sterling 1.3945, Swiss $1.0177, … European Style: rand 12.46, krone 7.9470, SEK 8.5444, forint 256.67, zloty 3.4560, koruna 20.8574, RUB 61.60, yen 109.10, sing 1.3277, HKD 7.8479, INR 66.91, China 6.3074, peso 18.99, BRL 3.4581, Dollar Index 91.03, Oil $67.92, 10-year 3.01%, Silver $16.61, Platinum $921.66, Palladium $967.38, and Gold… $1,325.40

That’s it for today… I don’t know why I did that, but I stayed awake to watch the whole baseball game last night, and to eventually see the Mets win in extra innings. UGH! For the first time this year, the Cardinals young ptiching stud, didn’t pitch out of jam… I have some calling to the insurance company to do today, UGH! They are a bunch of knuckleheads and getting my point across to them has to be a lot like Hell would be.. Oh well, if life were easy we’d all be living to 100! The O’Jays take us to the finish line today with their song: The Backstabbers… What they do! I told longtime readers a few years ago when this song played that it always reminded me on someone… And that’s all I have to say about that! I hope you have a Wonderful Wednesday! And Be Good To Yourself!

Chuck Butler
Creator & Editor of:
A Pfennig For Your Thoughts

) The Daily Pfennig is no longer published by EverBank and it is now published by Aden Research Group.

Chuck Butler recently joined the Aden Research Group, a research center led by writers and market analysts Pamela and Mary Anne Aden. The Aden Research Group publishes three newsletters:
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