The Cleanest Shirt Is Actually Pretty Dirty

Remember last November when it seemed like everyone was a US dollar bull? Either they thought Trump would usher in the next Reaganesque US economic free market nirvana, or they were convinced there was this massive US dollar emerging markets short position from the years of USD debt issuance.

Nothing better illustrates the one sided nature of US dollar sentiment than the early December 2016 issue of The Economist.

It was tough to find anyone who thought the US dollar might decline. Which is exactly why it did.

Fast forward to today. After six months of near constant dripping lower, suddenly with the break of some long term support, the pundits are now convinced the US is headed much lower.

And maybe we are. Who knows? This market has certainly been difficult to trade lately, so perhaps we are due for an easy, trending, simple US dollar breakdown.

I don’t have an outright view on the US dollar. Longer term, I am a mega bear, but over the short run, I am not sure I want to jump on the negative bandwagon.

But I would like to point out how much the US dollar decline is affecting other asset classes.

I would make the case that the US dollar is currently the only thing that matters.

Let’s start with gold. Now that we have broken out above $1300, the trading community is becoming quite enamoured with our precious little yellow friend.

And there can be no denying, that’s a good looking chart. And far be it from me, a huge Hereford of a gold bull, to suggest something’s not quite right about this rally, but I can’t help but wonder if this is truly the rise the bulls are looking for.

Have a look at gold priced in Euros.

The price of gold in Euros has been declining for all of 2017.

And even gold priced in Yen has been somewhat stagnant for this year, although it has recently broke out.

Coincidentally, that breakout occurred shortly after Kuroda gave his Jackson Hole interview where he expressed skepticism that the Japanese economy would be able to wean itself off of the extraordinary monetary stimulus programs.