US Bonds = Source of Currency Trends?

THE SOURCE OF MAJOR CURRENCY TRENDS

As I often advocate here, one should stand back and assess the sources of trends and their direction.

One of the ways that it is easy to become confused is by looking at a single market ( the Japanese Yen index for example) or even a single group (like the Currencies, for example) too intently.

One should, instead, perhaps, ask some fundamental questions like, “What are we measuring in this market or group”?

In the case of currency indexes overall, the answer is:

We’re measuring MONEY supply & valuation.

The next question is:

“WHAT IS THE SOURCE OF THIS MONEY”?

The surprising answer that I propose is shown on the chart below for US BONDS . . .

Current US Bond Trends

US Bond Trends

Normally, we’ve been trained to view two different markets to be as different as Apples (Bonds) and Oranges (Currencies).

Today, I’ll show you how Apples have become Oranges.

THE SECRET OF THE US BOND MARKET:

This single market has become the spigot for the unending stream of money called Quantitative Easing (QE).

From this market, hundreds of billions and even trillions of US DOLLARS overflow into the US STOCK MARKET (pumping it ever upwards) and influence all major  foreign currencies whose economies are tightly connected to that of the US.

The proof of this is shown below in the free and private Member’s section. Please join now to be able to view them immediately in the private section just below here.

Only members will be able to view these unique charts that tie together and solve the mysterious connection between the currency markets and bonds. JOIN HERE.

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Now, we’ll take a look at what most have never considered before; the source of a trend in a set of major currencies OUTSIDE OF THE CURRENCIES THEMSELVES.

We’re going to use a derivative of the 45 degree angle of WD GANN to set the initial pattern we’ll be looking at.

In this case, we’re looking for a rate of price decline that’ closely approximates a derivative of the 45 degree line of descent.

At the chart above shows, starting with US BONDS, we note the decline matches the rate of the descending red line which is a derivative of a 45 degree angle.

Let’s look at the bonds and shorter-term notes together to see how they have established the pattern.

US  BOND & NOTE TRENDS

US BOND & NOTE TRENDS

Now, compare the angles of the above markets; the largest wealth-holding ones in the World, with the currency indices shown on the below charts . . .

Major Currency Trends

Major Currency Trends

Yes, that’s right. They all share the same angle of decline!

Following the adage that ‘the Greater Rules the Lesser‘, we’re drawn to the conclusion that the World Reserve Currency, the US DOLLAR and dollar-denominated assets (US STOCKS & BONDS) are directly controlling these currency markets and nations and forcing a depreciation of value in all of them that’s tied to the angle of  interest rates in US BONDS & NOTES.

Note that you won’t see this pattern using only forex charts as they’re charts showing comparisons between a pair of currencies (usually one of them is the USD) and that alters the chart’s pattern in ways that can easily mislead.

Let’s see what the US DOLLAR INDEX shows relative to a derivative of this very important 45 degree angle . . .

US DOLLAR INDEX TRENDS

US DOLLAR INDEX TRENDS

The US DOLLAR has broken upwards and is on a 45 degree rising line and is on a steep upwards trend that exceeds the decline rate of the other currencies by a good margin. This steeper rate of momentum is what alters actual forex charts to show pairs that seem to be moving upwards when, in actuality, the core currency may be in decline.

Take the GBP/JPY forex pair for example.Although the US DOLLAR is not involved in this pair, it’s a good example of forex charts giving the wrong overall impression of a currency’s true value.

GBP-JPY Chart

GBP-JPY Chart

The forex pair chart looks like it’s in a strong upwards move. But, if you look at the two charts above for the two separate indices for the GBP and the JPY you can plainly see that BOTH currencies are in decline.

So, forex charts measure the relative movement between two currencies which may BOTH be in decline but at different rates for each.

Clearly, the currency indices are a better guide to a currency’s health than any forex chart could ever be.

Forex charts are an adventure in a fantasy world of  Relativism which is ok for very short-term trading purposes but their use is ill-advised for determining the state of a nation’s economy. - George

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