Will Tomorrow's Job Report Provide Some Relief To The Dollar?

By: Jeb Handwerger | Thu, Oct 7, 2010
Print Email

In a recent article I wrote about how the Federal Reserve and Washington D.C. will do anything possible to save the markets from a bear market before the November election. Unemployment is high, defaults on homes and credit cards are rising and record amounts of taxpayer's money have gone to bail out failed banks. The last thing Washington wanted was another bear market before a November election. An emergency job bill was passed and the Fed started pumping money into the system. Now we are beginning to see the outcome of the Fed's actions as the world looks at a deteriorating dollar and the tension that surfaces with volatile exchange rates. Recent job bills and quantitative easing may help tomorrow's job report which could put some hawkish pressure on The Fed to change their stance.

I believe over the next few weeks volatility could increase as a major shift in Washington may occur. Although the equity markets are up, the dollar and the economy have not shown improvement. The "Tea Party" movement and politicians who push tax cuts and less government spending are gaining recognition. I would not be surprised if there is a shift in power which may be bullish for the dollar or another intervention from overseas to continue purchasing the dollar. Tomorrow's job report could provide relief to the oversold dollar as additional government jobs were created through recent legislation and massive cash infusion from The Fed. The dollar could have a dead cat bounce.

UUP Chart

Japan and China are facing pressure on growth from a devalued dollar. A cheap dollar is hard on businesses exporting to the United States. Japan is especially in a precarious situation where they have had to intervene to prop up the dollar in order to support growth. It was short lived as the yen dropped only to rally to new highs a few days later. This may lead to further easing by the Japanese and purchases of the dollar. Japan has not needed to do this since 2004.

FXY Chart

The Fed needed to ease this past summer as equity markets were on the brink of double dipping. Central Banks had no problem to devalue as well since the European Debt Crisis led a rush to the U.S. Dollar and at that time the Euro was collapsing and the dollar was high. The threat of deflation after the May "Flash" crash was very high and markets were on the brink of heading into new lows before an election. The Fed injected a lot of money into the system causing a dollar collapse and a rise in U.S. equities and a major breakout in precious metals.

Bullish sentiment in gold is reaching very high levels and if this deterioration of the dollar continues we could see more sovereign debt and liquidity issues. This could be bullish for the dollar. The weakness in the dollar will also put hawkish pressures on The Fed. Many are expecting more quantitative easing but the market may have a surprise if the Fed changes its language to support the dollar and curb the speculation into gold and silver. The jobs report tomorrow will prove to be a key figure on which The Fed will base its decision. Just remember in every bull market there are two steps forward followed by a step back. We may be entering that step back in precious metals.

 


 

Jeb Handwerger

Author: Jeb Handwerger

Jeb Handwerger
http://goldstocktrades.com

Jeb Handwerger

I started reading charts at eleven years old. One day my father, a market trader and technician found his library of books on technical analysis mysteriously disappearing. He later found the textbooks under my bed. For many years day and night I studied technical analysis and charting, working and learning from my father who has over 50 years of trading experience. Technical analysis is my passion and love.

In 2001, I started noticing the junior mining stocks and gold as having a tremendous upside. For the past 9 years I have researched many juniors and have identified the major winners using technical analysis and finding top management.

I earned a Bachelors Degree in Mathematics and a Masters Degree. I learned most of my technical analysis from the school of hard knocks, managing real money for myself and for my family.

Constantly perfecting my craft, I have traded for two decades of success in many different markets. I have been asked to post ideas to some of my students who have taken my course in charting and technical analysis. I have made an excellent living trading stocks for myself.

We are offering ideas for your consideration and education. We are not offering financial advice. None of our content is provided to invite or encourage any person to make any kind of investment decision. We are not financial advisors. We advise you to consult with a professional financial and investment advisor before relying on any content.

We are sharing our ideas for educational and informational purposes only. You must do your own due diligence and are responsible for your own investments.

Companies that are followed in our premium service may become sponsors on Gold Stock Trades and/or our free or affiliate websites to distribute press releases or corporate updates for a monthly fee on our free website. From time to time, Gold Stock Trades and its directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise. Please see our list of current sponsors and featured companies for any potential conflicts of interest.

Some information in our content can be construed as forward-looking statements. Forward looking statements are uncertain and actual results may differ from our expectations. We seek safe harbor.

By reading this disclaimer you will not hold responsible any person associated with http://goldstocktrades.com responsible for any losses that may occur from trading based on this information. If you do not agree with the terms of our disclaimer, do not access our website or content, and unsubscribe if you are already a member.

Sign up for my free newsletter where I will post my "up to the minute" ideas and analysis of the markets. Comment and ask questions as we are all learning and growing. Empower yourself and learn how to anticipate opportunities.

All material on my newsletter and blog is copyrighted.

Please contact us here with any questions, comments or interviews.

Copyright © 2010-2014 Jeb Handwerger

 

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com

SEARCH





TRUE MONEY SUPPLY

Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/