The Dollar Is Sooooooooo Overbought!

Rocktober 3, 2023

* currencies & metals get whacked on Monday

* RBA leaves rates unchanged… 

Good Day… And a Tom Terrific Tuesday to you! Well, the construction people showed up yesterday morning, and began work on putting our house back together. That brought lots of noise to a house that was as quiet as a Church Mouse last week, when I was alone! And that noise played hell with me trying to get a nap in! But, I finally prevailed, so not all was lost. I aplogize for probably giving you all cause to worry about me with my comments yesterday about having an “incident”…  It’s something that I’ve had to deal with again, after years of not having to deal with it, and that is profuse bleeding in my jaw where the tumor likes to grow. While the bleeding is a pain, it also reminds me that the chemo I’m taking is working, and that the tumor is shrinking… Chicago greets me this morning with their mega hit song: I”m A Man…  
Well, what can I say about that dollar rally yesterday? It was a dollar rally to beat the band, that’s what I can say! The BBDXY gained 9 index points in one day! That’s right, I said 9!  Like the John Lennon song, #9 Dream… “Was it a dream? I know, yes I know, it seemed so very real, Seemed so real to me”…  That song was one of his best works, in my opinion… Ok, back to the dollar rally yesterday… it came out of left field, and came hard and fast… And before you knew anything, the dollar was up 4 index points, then 5 and so on… 
It all had to do with Jerome Powell’s bit at a conference he attended and spoke at… He basically said interest rates will remain higher and longer once again, and this time the markets took him for his words…  And the next thing I expect to receive in the mail is a letter from a lender telling me that it’s time, now, to take out a loan that could be refinanced at a lower level later…   Leading the sheeple to ruins… I’m just saying… 
And his words didn’t work well with Gold & Silver, who got royally whacked once again yesterday… Gold lost $20.70 on the day to end the day at $1,828.70, and Silver lost $1.13 to end the day at $22.14… When will the short paper traders end this crusade to weaken Gold & Silver?  Inquiring minds need to know! 
The price of Oil dropped below $90 to end the day at $89…  And with no Fed interference in bonds, the 10-year’s yield rose to 4.68% yesterday… 
Here’s the skinny on the Oil price decline from Bloomberg.com “Oil fell, with the US benchmark tumbling below $90 a barrel, as worries about further interest rate increases and a slowdown in the economy roiled broader markets.
West Texas Intermediate ended the session below $89 a barrel, reversing course after an earlier increase of 1.2%. The S&P 500 slipped and the dollar rose, with investors awaiting clues about the path of Federal Reserve interest rate policy. Prices held onto losses as Fed Chief Jerome Powell appeared at a roundtable discussion on Monday. Officials have indicated rates are likely to remain high, while JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon sees the possibility of them climbing more.”
Chuck again… so the Powell message was well received by the markets… 
In the overnight markets last night… the dollar buying continued en masse… It was ugly for the currencies, is ugly for the currencies, and will be ugly for the currencies, as long as the dollar is in the overbought position.  The BBDXY has gained 3 more index points overnight and looks to continue its rise today. I don’t know what it will take to get this runaway dollar bus to turn around, but it had better come to the currencies & metals rescue quickly…  Gold continues to get whacked, and overnight it lost another $3, while Silver is 12-cents lower this morning…  The price of Oil dropped another buck and trades this morning with an $88 handle, and the 10-year’s yield rose again, and the bond trades with a 4.74% yield this morning. 
The Russian ruble traded, intraday, yesterday at 100… It rallied to get back below that figure, but the sell for the currency is in place… With Oil slipping again, this doesn’t help the ruble’s fortunes…  The Russian Central Bank already hiked rates to 13% last month, to scrape some of the rot off the vine of the ruble, but that didn’t have any lasting effects… Hello, Elvira?  Yes, this is Elvira, Russian Central Bank Gov how can I help you?  This is Chuck Butler, and I’m calling about a question I’ve been wanting to ask you, are you ready?  Yes, go ahead…  Elvira, if I may call you by your first name, what are you going to do about this weakness in the ruble? I realize that the dollar is in buy mode, but that didn’t stop the ruble from gaining VS the dollar last year, when the dollar was in buy mode?  
And do you know what I heard?   Crickets… 
Well the Reserve Bank of Australia (RBA) met last night, and decided to keep rates at 4.1%, for the 4th month in a row… The Central Bank did mention that there could be a need for further rate hikes going forward, but for now they are still looking at what the 4% rate hikes are doing to the economy…  And for that non-move, the Aussie dollar (A$), dropped to a level that is barely above .63-cents… UGH!  
The Reserve Bank of New Zealand (RBNZ), will meet tomorrow night (Thursday for them), and given the non-move by the RBA, I would think that the RBNZ would do the same… And that won’t be good for kiwi…  But then with all this U.S. dollar strength, I don’t know that a rate hike here would have helped that much…  But it wouldn’t have hurt any either! 
And the lifeline the Riksbank threw the krona that I talked about yesterday, didn’t have any lasting effects on the currency, and it returned to trade above the 11 figure… UGH!  
The dollar is sooooooooooo overbought right now, but that’s not stopping this runaway bus…  So, with this going on, I just don’t have much to talk about,  and therefore the short-n-sweet Pfennigs… 
The U.S. data Cupboard yesterday had the Sept. ISM (manufacturing index), and it had a gain, in the month, but remained below 50 at 49%… This data had been trending downward, and was heading to 45, a couple of months ago, but now has corrected and is heading upward again…  I don’t see what’s behind this upward move, but then my wife says I can’t see, so there’s that! 
Today’s Data Cupboard just has the Job Openings data for August, which in July were 8.8 Million, and are expected to remain at that level… 
To recap, the overbought dollar went on the rampage, and gained 9 index points in the BBDXY, and has gained 3 more in the overnight markets to start the day today… Gold got whacked again this time by $20, and Silver by $1.43, and the selling doesn’t appear to be over.  The RBA left rates unchanged at their meeting last night… The Russian ruble traded at 100 int he intraday trading yesterday, and Chuck puts in a call to the Russian Central Bank Gov. to ask what she will do about all this weakness…. Crickets… 
For what it’s worth… Well, it’s time to check on what Pam and Russ Martens are writing about, and in this check, we find that they once again are pointing out that fines to banks that break the law are useless… And it can be found here: Five-Count Felon JPMorgan Chase Gets Hit with Another Federal Fine for 40 Million Derivative Violations; Pays 37 1/2 Cents Per Violation (wallstreetonparade.com)
Or, here’s your snippet: “In the eyes of Wall Street veterans who are paying close attention to what’s going down at the mega banks on Wall Street, federal regulators are making the crime wave at these banks worse, not better. The federal fines for egregious behavior at these banks are getting smaller and more meaningless by the day.

Take, for example, what happened on Friday. The Commodity Futures Trading Commission (CFTC) fined three of the largest trading houses on Wall Street a combined $53 million for derivative reporting violations. Those trading houses were units of Goldman Sachs, Bank of America, and JPMorgan Chase.
But what was particularly tone deaf about the CFTC’s settlement with JPMorgan Chase was the tiny amount of the monetary fine and the praise heaped on the five-count felon bank for its “cooperation” with the federal regulator.
According to the CFTC, over a period of five years, spanning 2017 to 2022, JPMorgan Chase Bank and two of its units “failed to report, or failed to correctly report, more than 40 million swap transactions.” The fine was a pathetic $15 million in total for the three JPMorgan units, meaning it cost this global behemoth just 37 ½ cents per law violation.
Last year, JPMorgan Chase reported $37.7 billion in net income. A fine of $15 million for 40 million violations of law is something that traders will make jokes about around the water cooler.
What is a “swap,” and what was JPMorgan Chase likely up to in failing to report or incorrectly reporting 40 million swap trades?
A swap is a derivative trade entered into between two parties via contract. According to the CFTC, the 40 million derivatives in this $15 million fine against JPMorgan Chase involved interest rate derivatives, foreign exchange derivatives, commodity derivatives and equity (stock) derivatives.

Why would a trading house fail to report a derivative trade? It could be that it had exceeded its speculative trading limits or that its counterparty on the trade was a risky counterparty that a federally-insured bank shouldn’t be doing business with or with whom it already had too many risky derivative trades. It could also be that one large trading house was attempting to manipulate the market to benefit one of its other trading positions.”

Chuck again…  That was a long snippet, and the article is even longer, so if you have the time… do go there and read it… 
Market Prices 10/3/2023: American Style: A$ .6304, kiwi .5898, C$ .7291, euro 1.0478, sterling 1.2072, Swiss $1.0840, European Style: rand 19.3189, krone 10.8981, SEK 11.0909, forint 368.70, zloty 4.4102, koruna 23.3790, RUB 99.18, yen 149.96, sing 1.3748, HKD 7.8313, INR 83.20, China 7.2980, peso 17.72, BRL 5.0611, BBDXY 1,276.87, Dollar Index 107.09, Oil $88.35, 10-year 4.74%, Silver $21.03, Platinum $879.00, Palladium $1,190.00, Copper $3.66, and Gold… $1,825.72
That’s it for today… late again today… This morning, I had to stop writing and help Kathy reconnect our cameras to the Wi-Fi… It couldn’t wait! Well, the baseball playoffs start today… I doubt that I’ll follow them closely, as my beloved Cardinals are not a part of them for the first time in a month of Sundays…   I do like the Tampa Bay Rays, for the way they construct their team… Our Blues lost their exhibition game with the Blue Jackets last night, they gave up 5 goals, and that’s unacceptable in my opinion!  I had a rough day yesterday, as the new chemo is taking its hits on me, right now… But I slept good last night, and seem to be better this morning… On my way to a good day!   Tommy James and the Shondells take us to the finish line today with their mega hit song: Crystal Blue Persuasion…  (I love this song!)  I hope you have a Tom Terrific Tuesday today, and please Be Good To Yourself! 
Chuck Butler