Sunday, March 14, 2010

US Dollar Bulls About To Get Soaked?

"Anyone who can watch the trading patterns in gold the past 10 trading days from the time Asia opens until the time after Comex opens and still chooses to believe that the U.S. Government does not manipulate the price of gold is either mentally retarded or clincally insane."
-Dave Kranzler, The Golden Truth

I had to get away from these markets for a couple days, they were driving me insane. The obvious CRIMEX manipulation was causing my blood to boil. After observing the CRIMEX goons attack the price of Gold for three straight days at the opening of their circus tent each morning it was either walkout or blow something up.

Clearly the CRIMEX goons were working at the behest of the US Treasury, selling into the market for no other reason than in an attempt to scare investors out of Gold and into the "safe-haven" of US Government Debt, of which the US Treasury was actioning off more than $150 BILLION of last week.

The debt auctions all reportedly met with robust demand. Only a fool would believe that global investors are sitting around salivating at the opportunity to buy debt from the USA. For how much longer can this charade be maintained? Indefinitely? I seriously doubt it. Recall that just last week it was announced that the February US Government deficit hit an all time monthly high of $221 BILLION. The US Government went $221 BILLION further in the whole in JUST the month of February. Would you buy this country's debt? How could you buy it and expect to ever be paid back what it cost you? Talk about insanity? Buying US Government debt is insane.

As I took a fresh look at the charts this morning, I focused on the Euro. The Euro has been tarred and feathered by the currency traders since the first week of December, coincidentally the most recent peak in the Dollar price of Gold at 1226 was on December 2, 2009. Thru the first six weeks of the new year, a record short position in the Euro began to be recognized in the financial media as the Euro came under increasingly intense pressure because of the rise in the costs to insure Greek member debt against default.

A record short in the Euro? This piqued my interest as a contrarian investor. When one side of the boat gets too full with like minded traders, it will likely tip over. I smelled a short squeeze in the Euro looming nearby. What would be the catalyst that would set a short squeeze in the Euro in motion? In all likelihood, the obvious catalyst would only become apparent once the perceived short squeeze began.

On Friday the Euro broke strongly from a three week consolidation. [see chart posted above] The short squeeze we sought had been triggered. Once the consolidation of the Euro had been broken to the upside, a bottom in the Euro could be determined. A very bullish candle on February 18 of a daily chart of the Euro caught my eye. This lead me to a search of the news on February 18.

On Thursday, February 18, 2010, at 4:30PM est, The US Federal Reserve announced a 1/4 point increase in their Discount Rate from 50 to 75 basis points. [ This announcement was very sudden, and caught most traders by surprise. It was immediately deemed bullish for the US Dollar, and very bearish for Gold by financial analysts almost in unison. But was it?

The Euro had made a very strong move off it's February 17 low of 1.3443 earlier on the 18th, prior to the Fed's Discount Rate announcement later in the day. Coincidentally, the 1.3443 low was almost exactly a 61% retracement of the Euro's run up to 1.5144 from it's March 2009 lows. Was an interim bottom in the Euro being established at 61% Fibonacci support an a short squeeze imminent?

This apparent low in the Euro, just prior to the Fed announcing a Discount Rate hike, begins to smell fishy in hindsight. And the subsequent reaction to the Discount Rate hike as being bullish for the Dollar begins to smell not only of fish, but of BULLSHIT.

In the Fed's press release regarding the Discount rate increase they make note of it's effect on "monetary policy" before there is mention of the actual increase in the Discount rate.

The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy, which remains about as it was at the January meeting of the Federal Open Market Committee (FOMC).

It should have been clear to anybody that actually read the Fed's press release, that a rise in the Fed's "overnight, short term interest rate" was not only not imminent, but not really even open to question. The financial media and analysts however reported otherwise, and the Dollar quickly rallied, and Gold prices fell. The Dollar rallied overnight in Asia and Europe, and Gold fell as it did. That is until early on Friday February 19, when a Fed official came forward to clarify the Fed's position on interest rates, and strongly reiterated the Fed's intention to keep interest rates low for an "extended period". The Dollar rally was halted immediately upon this Fed officials comment, and the Dollar has not since reached the highs it did on the morning of February 19, 2010. [see chart posted above]

Was the timing of the Fed's Discount rate increase, and the financial media and analysts reaction to it all a coordinated "event" to allow a window of opportunity for the big commercial Euro shorts to cover their trades and profit immensely before the short Euro trade turned against them? Yes, this sounds crazy, but consider this forgotten news item released on February 17, the day the Euro hit it's low and 61% retracement support, and Euro Gold prices were threatening new all-time highs:

IMF to Begin On-Market Sales of Gold
International Monetary Fund Press Release
Wednesday, February 17, 2010

Is there any question the Gold market is manipulated? Is it just a coincidence that the IMF makes a statement regarding what is obviously "old news" the day PRIOR to the US Federal Reserve raises it's Discount Rate? Not likely.

Factoring in the IMF "news release" prior to the Fed's Discount Rate announcement, one begins to wonder if the Fed knew their Discount Rate announcement was an act of desperation to sustain the stumbling US Treasury market, and "events" had to be coordinated to suggest otherwise to the investing public. The US Dollar has done anything but rally since the Fed's Discount Rate announcement. The US Dollar has been treading water ever since, barely keeping it's head above water. With the Euro's strong move up Friday out of a consolidation zone, coupled with the Dollar's close below the important 80 level, perhaps the desperation of the US Federal Reserve is about to be fully recognized.

A reported record long position in the US Dollar may be about to capsize another boat.

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