In my infinite critical wisdom I was early among those who predicted the euro currency wouldn’t survive.  I was confident Greece would default and be pushed out of the single currency regime.  I believed the ECB was feckless in the face of crisis.  I of course was dead wrong on all accounts. 
 
I could say “my call for euro demise was early” and suggest I may still be correct. But when you look at the charts below of the 10-year benchmark bond spreads between those periphery countries teetering on sovereign bankruptcy expectations in the midst of the crisis (and Germany), you have to marvel at the success of the ECB under President Mario Draghi’s stewardship—regardless of how he did it or lucky he may have been: 

Read the full issue here

Jack Crooks
Black Swan Capital

With continued turmoil and uncertainty in global markets, today KWN is publishing another important piece that was written by a 60-year market veteran.  The Godfather of newsletter writers, Richard Russell, made this ominous prediction, “In a matter of months, I see the dollar crashing.”  Russell also stated that he is buying all of the physical gold and silver he can, “while they are still available.”

…continute reading HERE

The common currency declined against the U.S. dollar after stronger-than-expected U.S. economic data. Earlier yesterday, the Labor Department showed that the CPI rose 0.2% in March (above expectations for a 0.1% increase), while the core consumer price index (without volatile food and energy items) rose 0.2% last month (also above forecast of a 0.1% gain). Thanks to these better-than-expected numbers, the exchange rate tested the strength of the major support line. Will it stop sellers? 

EUR/USD

Larger Image

From the weekly perspective, we see that EUR/USD still remains above the previously-broken long-term declining resistance line and the lower border of the rising trend channel (marked with brown). So, what we wrote in our previous Forex Trading Alert is still up-to-date.

(…) These two important lines still serve as major support. As you see on the above chart, the exchnge rate remains below the 2014 high and the rising resistance line (marked with red), which succesfully stopped growth in the previous month. From this perspective, it seems that as long as these key lines are in play, a bigger upward or downward move is not likely to be seen.

Let’s take a look at the daily chart. (click for larger chart)

Larger Image

As you see on the daily chart, EUR/USD slipped below the upper line of the declining trend channel and reached the 50% Fibonacci retracement level (based on the recent rally) earlier today. Although this support level encouraged buyers to act (which resulted in a corrective upswing), the pair still remains quite close to this important line. If it holds, we may see another corrective upswing in the near future. However, if it is broken, we will likely see further deterioration in the coming days and the initial downside target will be around 1.3777, where the long-term declining line is (please note that in this area is also the 50-day moving average). Additionally, the position of the indicators (sell signals remain in place) favors sellers at the moment.

Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: bearish
LT outlook: bearish

Trading position: In our opinion no positions are justified from the risk/reward perspective. We are not opening short positions just yet, because of the divergence on the long-term charts (we wrote more about this situation in our Forex Trading Alert posted on Thursday), however we will quite likely open it once we see some kind of confirmation.

GBP/USD

Larger Image (all charts are linked for larger images – Ed)

From the weekly perspective, we see that the situation hasn’t changed much. So, what we wrote in our last Forex Trading Alert is still up-to-date.

(…) GBP/USD still remains below the strong resistance zone created by the 2009, 2011 and 2014 highs, which suggests that further deterioration should not surprise us. In fact, it’s likely enough to justify having a speculative short position open (the one that was opened yesterday is already profitable).

To have more complete picture of the current situation in GBP/USD, let’s take a look at the daily chart.

In our Forex Trading Alert posted on Thursday, we wrote the following:

(…) GBP/USD (…) reached the 2014 high earlier today. If this strong resistance level holds, we will likely see a bearish double top pattern. In this case, the initial downside target will be the medium-term rising green line (currently around 1.6676). If it is broken, we may see a drop to the lower border of the orange rising trend channel (around 1.6550), which corresponds to the April low. (…) Please note that the current position of the indicators suggests that correction is just around the corner (…)

As you see on the above chart, GBP/USD extended declines and broke below the medium-term rising green line earlier today. Although this deterioration was only temporarily and the exchange rate came back above this line, sell signals remain in place, which suggests that another attempt to move lower should not surprise us. If this is the case, the above-mentioned downside target will be in play.

Very short-term outlook: mixed with bearish bias
Short-term outlook: bearish
MT outlook: bearish
LT outlook: mixed

Trading position (short-term; our opinion): Short. Stop-loss order: 1.6855. Please note that even if GBP/USD breaks above the 2014 high (and stop-loss order works), we’ll consider re-opening short positions around the 2009 high. At this time, however, it seems that these levels will not be reached before we see another sizable downswing – and thus the current short positions are still justified.

USD/JPY

Looking at the USD/JPY from the monthly perspective, we see that the exchange rate remains below the long-term declining resistance line. Therefore, even if the pair erases losses and climbs above the April high, it seems that further gains will be limited around 105.80, where the major long-term resistance is. We might open a speculative long or short position after the currency pair breaks above the long-term resistance line, or invalidates such breakout.

Having discussed the above, let’s move on to the daily chart.

From this perspective, we see that there was another attempt to break above the upper green line, but the buyers failed, which resulted in a drop to the lower support line. If it holds, we may see another try to close the day above the upper support/resistance line. However, if it is broken, we will likely see a drop to the March 14 low or even to the February low. Nevertheless, we should keep in mind that the CCI and Stochastic Oscillator generated buy signals, which suggests that the pro growth scenario is more likely at the moment.

Very short-term outlook: mixed with bullish bias
Short-term outlook: mixed
MT outlook: bullish
LT outlook: bearish

Trading position (short-term): In our opinion no positions are justified from the risk/reward perspective at the moment.

USD/CAD

As you see on the above chart, USD/CAD extended gains and approached the previously-broken green support line earlier today. Despite this improvement, we noticed similar price action to the one that we saw yesterday – the exchange rate gave up some gains and declined. If the pair extends losses, we may see a pullback to around 1.0909 (where the Feb.19 low is) or even to the April low of 1.0857. On the other hand, if the buyers manage to push the exchange rate higher, we may see an increase to the major resistance line (currently around 1.1026). Please note that the pro growth scenario is reinforced by the current position of the indicators (the RSI bounced off the level of 30, while buy signals generated by the CCI and Stochastic Oscillator remain in place).

Very short-term outlook: mixed with bullish bias
Short-term outlook: mixed
MT outlook: bullish
LT outlook: bearish

Trading position (short-term): In our opinion no positions are justified from the risk/reward perspective at the moment.

USD/CHF

As you see on the above chart, the situation hasn’t changed much as USD/CHF remains around the lower border of the blue rising trend channel. Therefore, what we wrote yesterday, is still valid.

(…) If the buyers do not give up and break above this resistance line, we may see an increase to (at least) 0.8813, where the Apr.1 low is. However, if the fail, we will likely see a pullback to the April low or even to the declining brown line (currently around 0.8718). Please note that the RSI bounced of the level of 30, while the CCI and Stochastic Oscillator generated buy signals, which suggests that another attempt to move higher should not surprise us.

Very short-term outlook: mixed with bullish bias
Short-term outlook: mixed
MT outlook: bearish
LT outlook: bearish

Trading position (short-term): In our opinion no positions are justified from the risk/reward perspective at the moment.

AUD/USD

Quoting our last Forex Trading Alert:

(…) the pair still remains below the resistance zone created by the 70.7% Fibonacci retracement (based on the entire Oct.-Jan. decline). If it holds, we may see a pullback in the coming days. In this case, the downside target for the sellers will be the previously-broken upper line of the trend channel. Taking into account the current position of the indicators (the RSI is overbought, while the CCI and Stochastic Oscillator generated sell signals), it seems that we will see another attempt to realize the bearish scenario in the following days.

Looking at the above chart, we see that AUD/USD gave up the gains and reversed earlier today. With this downswing, the sellers erased not only all yesterday’s gain, but also pushed the exchange rate below Friday low. Additionally, the current position of the indicators (sell signals remain in place) still favors sellers, which suggests that the bearish scenario from our last Forex Trading Alert is likely to be seen in the coming days.

Very short-term outlook: bearish
Short-term outlook: mixed with bearish bias
MT outlook: bearish
LT outlook: bearish

Trading position (short-term): In our opinion no positions are justified from the risk/reward perspective at the moment.

Thank you.

Two bright white eyes looked at me inquisitively through the small hatch in the nondescript metal door.

I quickly glanced around the dark, empty streets of the Palermo district in Buenos Aires and whispered the password. 

The door clanked open, revealing a small antechamber and a phone booth. I picked up the receiver and punched in a 4-digit code, and a second door opened.

Now I could begin to see the interior of “Frank’s”. 

It was lit with elaborate chandeliers and accented with ornate leather seats, and Sidney Bechet was in full swing on his saxophone. 

It was amazing, it looked just like a New York City speakeasy from the 1920s back in the days of prohibition and bootleg moonshine. 

And that’s exactly what the proprietor intended—a nod to a time when an entire population was constantly having to outsmart destructive government policy.

Just to do something as simple as having a beer, people had to come up with elaborate schemes, passwords, and secret locations on nondescript streets.

Coincidentally, Frank’s is the perfect illustration, not only of New York in the 1920s, but of all of Argentina today. 

Argentina is one of the places where debilitating capital controls are the rule.

The government has its ‘official’ exchange rate, and they’ve outlawed unofficial transactions with foreign currency. 

But like prohibition-era bootleggers, an entire cottage industry has emerged with legions of street dealers trading currency far beyond the law.

Capital controls are only the start. This government has tried just about everything—price controls, credit controls, even people controls. 

They’ve nationalized private assets. They’ve thrown dissenting economists in jail.

Now they’re going around collecting everyone’s fingerprints. They’ve just added another 100 products to the list of controlled prices. 

And yet, inflation still rages. People’s standards of living are being destroyed. 

The pesos that they earn are buying less and less. Despite the controls, prices are still rising much faster than wages.

All of this has led to mass poverty returning in a big way. Beggars once again line the streets in Buenos Aires. There’s been a noticeable increase just since I was here two months ago.

This is a familiar story. Argentina has spent the last several decades stumbling from crisis to crisis. 

Like many countries in the West, Argentina has had a long trend of political incompetence. This once-rich nation has been ruled by those who thought that universal economic laws simply did not apply.

They thought that Argentina could live beyond its means forever… that they could borrow money to pay interest on what they’ve already borrowed.

The Argentina of today shows that there are serious consequences for nations that follow this approach… and for people who do not heed the writing on the wall. 

It’s easy to pretend like everything is OK. Sometimes we’re surrounded by grandeur and opulence, and it’s easy to mistake this veneer for wealth. 

It’s not. Real wealth comes from freedom, production, savings, and technology… not debt, spending, and money printing.

And though even I got lost in all the splendor of Frank’s speakeasy, I was immediately thrust back into reality when they refused to accept my credit card to settle the bill.

The difference between the official rate and black market rate is so vast, in fact, that many establishments are now refusing to accept credit card payments altogether. 

The staff apologized to me profusely, embarrassed at what their country had become. 

We joked about it as I pulled out a wad of cash I had recently procured from a street broker—

Cocktails: 175 pesos
Appetizers: 210 pesos
Capital controls: Priceless

It turns out there really are some things money can’t buy. Especially in worthless currency. 

Until tomorrow,

Simon Black

Subscribe to Simon’s Daily Letter HERE

In 2014 “One of two things is likely: Either the US dollar will be abandoned and collapse in value, thus ending Washington’s superpower status and Washington’s threat to world peace, or Washington will lead its puppets into military conflict with Russia and China. The outcome of such a war would be far more devastating than the collapse of the US dollar.”

2014 is shaping up as a year of reckoning for the United States.

Two pressures are building on the US dollar. One pressure comes from the Federal Reserve’s declining ability to rig the price of gold as Western gold supplies shrivel and market knowledge of the Fed’s illegal price rigging spreads. The evidence of massive amounts of naked shorts being dumped into the paper gold futures market at times of day when trading is thin is unequivocal. It has become obvious that the price of gold is being rigged in the futures market in order to protect the dollar’s value from QE.

The other pressure arises from the Obama regime’s foolish threats of sanctions on Russia. Other countries are no longer willing to tolerate Washington’s abuse of the world dollar standard. Washington uses the dollar-based international payments system to inflict damage on the economies of countries that resist Washington’s political hegemony.

Russia and China have had enough. As I have reported and as Peter Koenig reports here  Russia and China are disconnecting their international trade from the dollar. Henceforth, Russia will conduct its trade, including the sale of oil and natural gas to Europe, in rubles and in the currencies of its BRICS partners.

This means a big drop in the demand for US dollars and a corresponding drop in the dollar’s exchange value.

….continue reading whole article HERE