So not much going on in the markets then!
The rouble is collapsing, crude oil prices are plummeting, the Dow and other equity Indices are rising and falling so much that it’s created the largest end of year volatility seen in decades. Will Yellen hint at a rate rise in today’s FOMC statement? Couple that with the Sydney Siege and the Pakistan atrocity earlier today. What will be the path after this? Are we becoming de-sensitised? Ahh hell yes!
First off, what about this rouble crisis and what’s it got to do with oil?
The Russian Central bank fears that citizens will now withdraw roubles and exchange them for dollars – potentially totalling just a wee $300bln! Well it’s created a stir and the Russian Stock Market is down over 25% in just two days – incredible!
The hike in rates to 17% halted the rouble’s demise but only for a few hours. The rouble has now hit all-time lows against the euro and the dollar.
Sliding oil prices and limited access to financial markets in Russia are throttling the economy.
Elvira Nabiullina, head of the Russian Central Bank, said: ”To ease this pressure Russia needs external factors to stabilise. Speculative strategists should be made more risky and that is what they’re trying to achieve.”
I simply love the timing of this though, all when the Christian world is preparing for Xmas. Is this all a ploy by Putin; is he the smartest of all? I mean, he was once a part of the ‘Big Boys’ club and has (for lack of a better phrase) turned Rogue.
We know that there is a currency war going on right now and guess what? As I have said before, NOBODY wins a currency war – It ends badly!
We need a market collapse in order to come out of it and all nations to be satisfied with a Draw.
Sources close to me in London and Singapore say that the dwindling oil prices are already being covered by Big Generals in the Middle East, in the bid to go long in a big way very soon!
Could this Oil collapse be a way of creating the stage for the next Arab Spring, which will be on a whole new level? I think that is a possibility and if so, let it be.
As of the time of writing, I see USD/JPY nudging back above 117, as it’s taken a hit since it breached 121.50 (like I said it would hit 120 before Xmas back in September).
We have the PM getting re-elected in Japan which brought a spark back to the JPY and to boot the USD was overdue some resistance on a short term basis anyway. I see the USD/JPY maybe getting a third wind now on Wednesday. However, the words ‘Rock’, ‘Hard’ and ‘Place’ spring to mind.
Up until this week, investors were anticipating that FOMC officials were going to use the final meeting of 2014 to lay out good and proper, fine detail that will prompt them to raise rates next year for the first time since the financial crisis of 2008.
Fundamental data suggest that the U.S. can actually withstand higher rates – GDP growth in the 6 months to 30 September 2014 was the strongest it’s been in a decade!
Yellen and Co are sitting on a Rock in that hard place right now…
Any whisper of a hint on Wednesday that rates could rise faster than investors currently expect, will undoubtedly cause chaos in the markets; especially the emerging markets thus confirming that global growth will be halted through 2015.
On the other hand; yes I said Rock and Hard didn’t I – Failure to recognise the sterling work that has brought the U.S. economy up to current levels, will most certainly raise fears about the Fed’s own confidence of financial stability, that has come as a direct result from this extended period of low interest rates.
For me, it will be an interesting one…
I am OUT of the market AFTER Wednesday as I will be trading USD/JPY once more and maybe shorting the Dow.
The levels on both markets are:
Long USD/JPY – if it rallies above 117.50 POST Yellen’s speech!
Short Dow – if breaks below 16970 POST Yellen’s speech!
I will look to take 70 pips on USD/JPY and 100 on the Dow.
From the 29th Dec I will be away in Iceland for 6 nights over New Year and back at my desk from Jan 5th.
Very Best and I wish you a Merry Xmas!
DGFx Head Trader