Gibson Commemorates Fed Raid with Government Series II Les Paul

Two years after Gibson factories in Tennessee were raided by
government agents, the venerable guitar manufacturer has released a
special Government Series II Les Paul. As the
press release explains
:

Great Gibson electric guitars have long been a means of
fighting the establishment, so when the powers that be confiscated
stocks of tonewoods from the Gibson factory in Nashville—only to
return them once there was a resolution and the investigation
ended—it was an event worth celebrating. Introducing the Government
Series II Les Paul, a striking new guitar from Gibson USA for 2014
that suitably marks this infamous time in Gibson’s
history. 

…Each Government Series II Les Paul also includes a
genuine piece of Gibson USA history in its solid rosewood
fingerboard, which is made from wood returned to Gibson by the US
government after the resolution. 

Reason TV reported on the Gibson case back in 2012. Original
text from February 23, 2012 video is below. 

“They…come in with weapons, they seized a
half-million dollars worth of property, they shut our factory down,
and they have not charged us with anything,” says Gibson Guitars CEO
Henry Juszkiewicz, referring to the August 2011 raid on his
Nashville and Memphis factories by agents from the Departments of
Homeland Security and Fish & Wildlife.

The feds raided Gibson for using an inappropriate
tariff code on wood from India, which is a violation of
the anti-trafficking statute known as The Lacey Act. At issue is
not whether the wood in question was endangered, but whether the
wood was the correct level of thickness and finish before
being exported from India. “India is wanting to ensure that raw
wood is not exported without some labor content from India,” says
Juskiewicz.

Andrea Johnson of the Environmental Investigation Agency
(EIA)
 counters that “it’s not up to Gibson to decide which
laws…they want to respect.” She points out that Gibson had
previously been raided under The Lacey Act for imports from
Madagascar.

This much is clear: The government
has yet to file any charges or allow Gibson a day in court to
makes its case, much less retrieve its materials. “This is not
about responsible forestry and sustainable wood or illegal logging,
this is about a bureaucratic law,” argues Juszkiewicz, who
testified last year before a congressional hearing convened by
Sen. Rand Paul (R-Ky.). It is, he says, ”a blank check for
abuse.”

About 6 minutes.

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Is Hawaii’s Anti-GMO Movement Really Just Anti-Science?

“Is Hawaii’s Anti-GMO Movement Really Just
Anti-Science?” produced by Sharif Matar. 

Original release date was January 29, 2014 and
original writeup is below.

Hawaii is at the center of the fight over genetically
modified organisms (GMOs) – and the food people are eating all over
the United States.

Because of Hawaii’s favorable climate, plant breeders
and food companies do huge amounts of research and seed development
there, including modifying and transforming crops via all sorts of
biotechnology. In 2013, two islands in the Aloha State passed
legislation restricting GMO use and local and international
activists are pushing for broader bans across the rest of the
state. Anti-GMO activists say that the crops are potentially
harmful and can contaminate the rest of Hawaii’s
agriculture.

Legislators are currently considering a bill that would
mandate labeling on all foods with genetically engineered material,
a move that critics claim would increase the cost of food in Hawaii
even more (according to the U.S. Department of Agriculture, Hawaii
already pays about 40 percent more for food than other states).
Other states are also proposing GMO-labeling schemes because of the
fears associated with such products. Connecticut and Maine, for
instance, have already passed labeling laws, but they won’t go into
effect until after other states follow suit.

The battle over GMOs will likely turn on questions of
safety and property rights: Are GMO foods safe for human
consumption? And who gets to decide how cropland is used – voters
or landowners?

Reason TV traveled to Hawaii and reports on both
issues.

For more on the situation in Hawaii – and the
scientific consensus that GMO foods are absolutely safe to eat –
read Reason Science Correspondent Ronald Bailey’s story, “The
Fable of Hawaiian Frankencorn
.” For Reason’s coverage of
GMOs, go
here
.

About 9 minutes.

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Is Hawaii's Anti-GMO Movement Really Just Anti-Science?

“Is Hawaii’s Anti-GMO Movement Really Just
Anti-Science?” produced by Sharif Matar. 

Original release date was January 29, 2014 and
original writeup is below.

Hawaii is at the center of the fight over genetically
modified organisms (GMOs) – and the food people are eating all over
the United States.

Because of Hawaii’s favorable climate, plant breeders
and food companies do huge amounts of research and seed development
there, including modifying and transforming crops via all sorts of
biotechnology. In 2013, two islands in the Aloha State passed
legislation restricting GMO use and local and international
activists are pushing for broader bans across the rest of the
state. Anti-GMO activists say that the crops are potentially
harmful and can contaminate the rest of Hawaii’s
agriculture.

Legislators are currently considering a bill that would
mandate labeling on all foods with genetically engineered material,
a move that critics claim would increase the cost of food in Hawaii
even more (according to the U.S. Department of Agriculture, Hawaii
already pays about 40 percent more for food than other states).
Other states are also proposing GMO-labeling schemes because of the
fears associated with such products. Connecticut and Maine, for
instance, have already passed labeling laws, but they won’t go into
effect until after other states follow suit.

The battle over GMOs will likely turn on questions of
safety and property rights: Are GMO foods safe for human
consumption? And who gets to decide how cropland is used – voters
or landowners?

Reason TV traveled to Hawaii and reports on both
issues.

For more on the situation in Hawaii – and the
scientific consensus that GMO foods are absolutely safe to eat –
read Reason Science Correspondent Ronald Bailey’s story, “The
Fable of Hawaiian Frankencorn
.” For Reason’s coverage of
GMOs, go
here
.

About 9 minutes.

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Explosions And Heavy Gunfire In Bangkok Ahead Of Elections

17 years ago, the first major Emerging Market crisis started in Thailand, leading to the Russian default and the collapse of LTCM ushering in the era of Too Big To Fail. This time, all the world needed for the second major EM crisis, was for Ben Bernanke to announce he is giving global central planning a break (because one can be certain the Untaper will be right back on the agenda as soon as the S&P enters a bear market). Ironically, Thailand has largely been insulated from the EM decimation, even through it is now in as bad a political shape as it ever was, and one day ahead of the February 2 general elections things are getting from bad to worse. AFP reports that explosions and heavy gunfire rattled Bangkok Saturday as pro- and anti-government protesters clashed on the eve of controversial Thai elections seen as unlikely to end a cycle of violence in the kingdom after months of opposition rallies.

So far the market has discounted the political tensions’ impact on the economy, but that may change soon, especially if tomorrow’s election fails to stabilize the unstable political situation. “Tensions are high in the capital ahead of snap elections on Sunday, which opposition demonstrators have vowed to block as they seek to prevent the likely re-election of Prime Minister Yingluck Shinawatra.”

Tensions reached a breaking point hours ago when bystanders, security personnel and journalists raced to take cover in a shopping mall after a masked gunman man began spraying bullets from an assault rifle during confrontations between government supporters and opposition demonstrators, according to an AFP reporter.

AFP reports from the ground:

At least six people were injured as a busy intersection in a northern suburb of the capital was turned into a battle zone with volleys of sustained gunfire ricocheting off buildings for over an hour in a daylight attack that sent shockwaves across the city.

 

Bangkok has been rocked by weeks of sometimes bloody political violence during rallies by a loose coalition opposed to Yingluck and the enduring influence of her brother Thaksin Shinawatra — a former premier ousted by the military in 2006.

 

Saturday’s clashes happened after demonstrators blocking ballot boxes from being delivered from the Lak Si district office — one of 50 in the capital — were confronted by a group of some 200 government supporters, some armed with sticks and metal bars. At least two explosions were heard in the area before the firing began.

 

“The clash point is the intersection, gun shots seemed to be fired from both sides,” said Sunai Phasuk, a senior researcher with New York-based Human Rights Watch, who was at the scene. He said a reporter was among the injured.

 

The firing started after talks between the rival groups broke down in the area, which is roughly split between Yingluck’s supporters and those backing the opposition protests, Sunai added.

 

This is what we forecast for tomorrow. Tensions could flair up into violence very easily,” he told AFP, adding that protesters had been evacuated and tensions appeared to have calmed after nightfall. At least 10 people have been killed and hundreds injured in clashes, grenade attacks and drive-by shootings since the opposition rallies began three months ago.

 

The unrest is the latest round of political instability to hit Thailand since royalist generals ousted Thaksin seven years ago, unleashing a cycle of sporadically-violent street protests.

If there is any silver lining about the current cycle of violence is that so far it has not reached the proportions of the 2010 clashes when a military crackdown on pro-Thaksin Red Shirts demonstrating against the previous government left more than 90 people dead and nearly 1,900 injured.

The backdrop to the protests is a years-long political struggle pitting the kingdom’s royalist establishment — backed by the courts and the military — against Thaksin, a billionaire tycoon-turned-politician. The current protesters are mainly made up of Thaksin’s foes in the Bangkok middle classes and southerners, backed by factions in the elite.

 

They are demanding Yingluck’s elected government step down to make way for an unelected “people’s council” that would oversee loosely defined reforms to tackle corruption and alleged vote-buying.

 

“The government is corrupt. If we let the vote go on then they will come back, so we should not hold the election,” said opposition protester Sirames, who gave only one name, at the Lak Si office before the violence broke out.

 

Yingluck’s opponents say she is a puppet for her elder brother Thaksin Shinawatra, who lives in Dubai to avoid a prison term for graft. Around 130,000 police are set to protect 93,000 polling stations across the country on Sunday.

 

Yingluck is likely to win the poll, helped by strong support in Thaksin’s north and northeastern heartlands.

 

But uncertainty hangs over the results, with unrest threatening polling and several constituencies without a candidate. Authorities on Saturday said protesters were also blocking ballot boxes being delivered to polling stations across southern Thailand — the stronghold of the opposition Democrat Party.

While the probability of a deadly escalation tomorrow is slim – for now – the last thing the EMs need at this point is the flaring of risk at yet another key focal point, especially one that has so much deja vu emotional significance for market participants. We will keep an eye on Thailand over the next 24 hours and update as needed.


    



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Baylen Linnekin Says the Farm Bill Stinks

CattleLike
a phoenix made of pork, the Farm Bill has risen from the ashes. And
for opponents of farm subsidies and wasteful government spending,
that’s bad news. The most notable change in this year’s Farm Bill
is the elimination of direct farm subsidies, the
multi-billion-dollar handout to mostly wealthy farmers. That’s a
good thing. But in its place, Congress has substituted
taxpayer-subsidized crop insurance. And, writes Baylen Linnekin,
the bill taxpayers may foot for crop insurance subsidies—at least
$89 billion over ten years—may outweigh what taxpayers would have
contributed in direct subsidies.

View this article.

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Peter Schiff on The Daily Show, Talking Minimum Wage

Investment guru and free-market proponent Peter Schiff was
recently on The Daily Show for a segment about the minimum wage. It
didn’t go well. As he explains
in a column
:

My use of the words “mentally retarded” (when Samantha Bee
asked me who might be willing to work for $2 per hour – a figure
she suggested) has come to define the entire interview. Although I
had no intention of offending anyone, I just couldn’t remember the
politically correct term currently in use (it is “intellectually
disabled”). Assuming she knew it, Bee could have prompted me with
the correct term, but she chose not to. By including those
comments in the final package, “The Daily Show” proved that they
did not care who they offended, as long as they could make me look
bad in the process. The volume of hate mail I have received in the
show’s aftermath confirms their success on that front….

“The Daily Show” was never interested in an honest debate
about the minimum wage. Nor is it concerned with the
intellectually disabled, whom they have no qualms about offending
if they can get a laugh. In fact, it’s “The Daily Show” that
wants to tell the intellectually disabled they are worthless, as
they want to make it illegal for them to have jobs. I did not
notice any intellectually disabled people working at “The Daily
Show.” I’m sure many would jump at the chance, particularly if they
were offered minimum wage or higher. But since they choose to pay
their intellectually capable interns zero, why should they be
expected to pay the intellectually disabled more?


 More here
.

I’m sympathetic toward Schiff, especially since he’s proven to
be an incredible persuader in many other circumstances. Check out this
video
Reason TV did with him where he’s talking with Occupy
Wall Street protesters. It’s got almost half-a-million views and is
electrifying stuff.

Reason TV was at the same minimum-wage rally that appears in The
Daily Show bit. Here’s what we saw:

 

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US Dollar Poised for Additional Gains

The US dollar is poised to extend its gains against most of the major currencies in the week ahead.  The Japanese yen is the main exception.  A combination of equity market weakness, the smaller US interest premium and the large short position leave the yen bears vulnerable to further pressure.   

 

The yen is the only major currency to have appreciated against the dollar in January (3%).  The dollar’s five day moving average crossed below the 20-day average for the first time since late October on  January 13.   Since the multi-week low was set on January 27 near JPY101.75, the dollar has hovered around JPY102.   There is some support in the JPY101.50-60 area, but if that were to be convincingly violated, it could signal another 1% slide in relative quick order.   

 

There is little reason to expect participants to seriously try picking a bottom in the euro ahead of the ECB meeting Thursday. Selling into the occasional bounce is preferred to buying dips.  At least one major German bank has predicted that the ECB adopt a negative deposit rate and cut the refi rate 5-10 basis points (from 25 presently).   We are considerably less convinced, but recognize that the two pillars of ECB monetary policy (money supply and inflation) were softer than expected.  At the same time, we recognize that Draghi has surprised the market more than once on the accommodative side.  

 

Yet, ECB officials appear to recognize that the main problem is not the price of money.  Recent comments by officials suggest more interest in rekindling lending via securitization, but do not seem prepared to unveil a new initiative next week.  Moreover, a negative deposit rate could potentially be disruptive to the very institutions that the ECB wants to lend more.

 

The euro had been largely confined to a $1.3500-$1.3740 trading range this year, but may be breaking out.  It spent the second half of last week below the 100-day moving average (~$1.3600 and rising).  The 2-year interest rate differential is at 6-month highs, which should be dollar supportive.  The euro finished last week at new lows for the year.  The break of $1.35 could signal a move toward $1.33-$1.34 in the days ahead.  

 

Sterling is faring better than the euro, but it too appears to be carving out a top.  Remember it has rallied from near $1.48 six-months ago to almost $1.6670 on January 24.    It probably requires a break of the $1.6240-$1.6300 area to get the bulls to capitulate.  With suspicions that the UK will have to raise rates sooner than the BOE anticipates, other currencies may offer a more efficient way to express dollar bullish sentiment.

 

The Dollar Index is nearing the upper end of its three-month trading range near 81.50.   A break of this cap could see the advance extend toward 82.00, with the 82.50 area being a more formidable barrier.

 

The dollar-bloc currencies continue to trade heavily and although these may be crowded trades, the wind is to the back of the bears.   Yet, the US dollar staged a key reversal against the Canadian dollar before the weekend.  First it rose above CAD1.12 for the first time since July 2009, before reversing to finish the day below the previous session lows.   It closed just above the trend line drawn off this month’s lows that comes in near CAD1.1120.  We are suspicious that this marks an important high.   We would look at a pullback toward CAD1.1050 as a new USD buying opportunity in anticipation of a trend move in the medium term that could carry the greenback toward CAD1.15-CAD1.17.   

 

Even if the RBA is more neutral on rates at next week’s meeting, as some suspect, it still wants a lower Australian dollar.  Official guidance suggests $0.8000-$0.8500 is desirable.   We see bounces back toward $0.8850 as an opportunity to build shorts.   

 

The weakness in the Mexican peso appears to be largely the result of contagion from the sell-off of risk assets, including equities and other emerging markets.   Technical signals are not particularly strong.  We are more inclined to sell into contagion-spurred dollar spikes, but prefer to wait until there is greater stability in the emerging market space.  A break below MXN13.20 could confirm a top is in place for the greenback.  

 

Observation from the speculative positioning in the CME currency futures:

 

1.  After the net speculative positioning in the euro went short in the period ending Jan 21, for the first in nearly two months, it swung back to the long side in the most recent reporting period.  We fear it may be premature as the euro may be (finally) breaking to the downside.  However, the reason the net speculative position shifted back to favor the longs had more to do with shorts being covered (10.5k contracts) than longs being added (7.6k contracts).  Except for the Mexican peso, the other currency futures all saw a reduction of gross short positions.  Given the subsequent price action, this could be a  sign of the capitulation of the bulls.  

 

2.  This past reporting period saw more large (more than 10k contracts) position adjustments than has been experienced in several quarters.  Like the euro, the yen and Canadian dollar saw large declines in the gross short positions (25.9k and 11.0 k respectively).  The decline in the gross short yen position was the largest since July 2012.   The decline in the gross short Canadian dollar position is the largest in six months. Reflecting the contagion from the risk-asset sell-off, the gross short Mexican peso positions jumped by 25.7k contracts. 

 

3. The gross short yen position has been reduced consistently since the last two weeks of December.  Now with 102.2k short contracts, it is near three-month lows.  The dollar is near 2-month lows against the yen.  

 

4.  The net long sterling position increased by about 13.5k contracts, due in roughly equal measure to longs joining and shorts covering.  At 22.2k contracts long, it is the upper end of where it has been since Bear Stearns failed.  It has been larger for only around a dozen weeks since then.  The gross long position (63.4k) is also at the upper end of where it has been since the onset of the financial crisis. 


    



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US Dollar Poised for Additional Gains

The US dollar is poised to extend its gains against most of the major currencies in the week ahead.  The Japanese yen is the main exception.  A combination of equity market weakness, the smaller US interest premium and the large short position leave the yen bears vulnerable to further pressure.   

 

The yen is the only major currency to have appreciated against the dollar in January (3%).  The dollar’s five day moving average crossed below the 20-day average for the first time since late October on  January 13.   Since the multi-week low was set on January 27 near JPY101.75, the dollar has hovered around JPY102.   There is some support in the JPY101.50-60 area, but if that were to be convincingly violated, it could signal another 1% slide in relative quick order.   

 

There is little reason to expect participants to seriously try picking a bottom in the euro ahead of the ECB meeting Thursday. Selling into the occasional bounce is preferred to buying dips.  At least one major German bank has predicted that the ECB adopt a negative deposit rate and cut the refi rate 5-10 basis points (from 25 presently).   We are considerably less convinced, but recognize that the two pillars of ECB monetary policy (money supply and inflation) were softer than expected.  At the same time, we recognize that Draghi has surprised the market more than once on the accommodative side.  

 

Yet, ECB officials appear to recognize that the main problem is not the price of money.  Recent comments by officials suggest more interest in rekindling lending via securitization, but do not seem prepared to unveil a new initiative next week.  Moreover, a negative deposit rate could potentially be disruptive to the very institutions that the ECB wants to lend more.

 

The euro had been largely confined to a $1.3500-$1.3740 trading range this year, but may be breaking out.  It spent the second half of last week below the 100-day moving average (~$1.3600 and rising).  The 2-year interest rate differential is at 6-month highs, which should be dollar supportive.  The euro finished last week at new lows for the year.  The break of $1.35 could signal a move toward $1.33-$1.34 in the days ahead.  

 

Sterling is faring better than the euro, but it too appears to be carving out a top.  Remember it has rallied from near $1.48 six-months ago to almost $1.6670 on January 24.    It probably requires a break of the $1.6240-$1.6300 area to get the bulls to capitulate.  With suspicions that the UK will have to raise rates sooner than the BOE anticipates, other currencies may offer a more efficient way to express dollar bullish sentiment.

 

The Dollar Index is nearing the upper end of its three-month trading range near 81.50.   A break of this cap could see the advance extend toward 82.00, with the 82.50 area being a more formidable barrier.

 

The dollar-bloc currencies continue to trade heavily and although these may be crowded trades, the wind is to the back of the bears.   Yet, the US dollar staged a key reversal against the Canadian dollar before the weekend.  First it rose above CAD1.12 for the first time since July 2009, before reversing to finish the day below the previous session lows.   It closed just above the trend line drawn off this month’s lows that comes in near CAD1.1120.  We are suspicious that this marks an important high.   We would look at a pullback toward CAD1.1050 as a new USD buying opportunity in anticipation of a trend move in the medium term that could carry the greenback toward CAD1.15-CAD1.17.   

 

Even if the RBA is more neutral on rates at next week’s meeting, as some suspect, it still wants a lower Australian dollar.  Official guidance suggests $0.8000-$0.8500 is desirable.   We see bounces back toward $0.8850 as an opportunity to build shorts.   

 

The weakness in the Mexican peso appears to be largely the result of contagion from the sell-off of risk assets, including equities and other emerging markets.   Technical signals are not particularly strong.  We are more inclined to sell into contagion-spurred dollar spikes, but prefer to wait until there is greater stability in the emerging market space.  A break below MXN13.20 could confirm a top is in place for the greenback.  

 

Observation from the speculative positioning in the CME currency futures:

 

1.  After the net speculative positioning in the euro went short in the period ending Jan 21, for the first in nearly two months, it swung back to the long side in the most recent reporting period.  We fear it may be premature as the euro may be (finally) breaking to the downside.  However, the reason the net speculative position shifted back to favor the longs had more to do with shorts being covered (10.5k contracts) than longs being added (7.6k contracts).  Except for the Mexican peso, the other currency futures all saw a reduction of gross short positions.  Given the subsequent price action, this could be a  sign of the capitulation of the bulls.  

 

2.  This past reporting period saw more large (more than 10k contracts) position adjustments than has been experienced in several quarters.  Like the euro, the yen and Canadian dollar saw large declines in the gross short positions (25.9k and 11.0 k respectively).  The decline in the gross short yen position was the largest since July 2012.   The decline in the gross short Canadian dollar position is the largest in six months. Reflecting the contagion from the risk-asset sell-off, the gross short Mexican peso positions jumped by 25.7k contracts. 

 

3. The gross short yen position has been reduced consistently since the last two weeks of December.  Now with 102.2k short contracts, it is near three-month lows.  The dollar is near 2-month lows against the yen.  

 

4.  The net long sterling position increased by about 13.5k contracts, due in roughly equal measure to longs joining and shorts covering.  At 22.2k contracts long, it is the upper end of where it has been since Bear Stearns failed.  It has been larger for only around a dozen weeks since then.  The gross long position (63.4k) is also at the upper end of where it has been since the onset of the financial crisis. 


    



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US Dollar Poised for Additional Gains

The US dollar is poised to extend its gains against most of the major currencies in the week ahead.  The Japanese yen is the main exception.  A combination of equity market weakness, the smaller US interest premium and the large short position leave the yen bears vulnerable to further pressure.   

 

The yen is the only major currency to have appreciated against the dollar in January (3%).  The dollar’s five day moving average crossed below the 20-day average for the first time since late October on  January 13.   Since the multi-week low was set on January 27 near JPY101.75, the dollar has hovered around JPY102.   There is some support in the JPY101.50-60 area, but if that were to be convincingly violated, it could signal another 1% slide in relative quick order.   

 

There is little reason to expect participants to seriously try picking a bottom in the euro ahead of the ECB meeting Thursday. Selling into the occasional bounce is preferred to buying dips.  At least one major German bank has predicted that the ECB adopt a negative deposit rate and cut the refi rate 5-10 basis points (from 25 presently).   We are considerably less convinced, but recognize that the two pillars of ECB monetary policy (money supply and inflation) were softer than expected.  At the same time, we recognize that Draghi has surprised the market more than once on the accommodative side.  

 

Yet, ECB officials appear to recognize that the main problem is not the price of money.  Recent comments by officials suggest more interest in rekindling lending via securitization, but do not seem prepared to unveil a new initiative next week.  Moreover, a negative deposit rate could potentially be disruptive to the very institutions that the ECB wants to lend more.

 

The euro had been largely confined to a $1.3500-$1.3740 trading range this year, but may be breaking out.  It spent the second half of last week below the 100-day moving average (~$1.3600 and rising).  The 2-year interest rate differential is at 6-month highs, which should be dollar supportive.  The euro finished last week at new lows for the year.  The break of $1.35 could signal a move toward $1.33-$1.34 in the days ahead.  

 

Sterling is faring better than the euro, but it too appears to be carving out a top.  Remember it has rallied from near $1.48 six-months ago to almost $1.6670 on January 24.    It probably requires a break of the $1.6240-$1.6300 area to get the bulls to capitulate.  With suspicions that the UK will have to raise rates sooner than the BOE anticipates, other currencies may offer a more efficient way to express dollar bullish sentiment.

 

The Dollar Index is nearing the upper end of its three-month trading range near 81.50.   A break of this cap could see the advance extend toward 82.00, with the 82.50 area being a more formidable barrier.

 

The dollar-bloc currencies continue to trade heavily and although these may be crowded trades, the wind is to the back of the bears.   Yet, the US dollar staged a key reversal against the Canadian dollar before the weekend.  First it rose above CAD1.12 for the first time since July 2009, before reversing to finish the day below the previous session lows.   It closed just above the trend line drawn off this month’s lows that comes in near CAD1.1120.  We are suspicious that this marks an important high.   We would look at a pullback toward CAD1.1050 as a new USD buying opportunity in anticipation of a trend move in the medium term that could carry the greenback toward CAD1.15-CAD1.17.   

 

Even if the RBA is more neutral on rates at next week’s meeting, as some suspect, it still wants a lower Australian dollar.  Official guidance suggests $0.8000-$0.8500 is desirable.   We see bounces back toward $0.8850 as an opportunity to build shorts.   

 

The weakness in the Mexican peso appears to be largely the result of contagion from the sell-off of risk assets, including equities and other emerging markets.   Technical signals are not particularly strong.  We are more inclined to sell into contagion-spurred dollar spikes, but prefer to wait until there is greater stability in the emerging market space.  A break below MXN13.20 could confirm a top is in place for the greenback.  

 

Observation from the speculative positioning in the CME currency futures:

 

1.  After the net speculative positioning in the euro went short in the period ending Jan 21, for the first in nearly two months, it swung back to the long side in the most recent reporting period.  We fear it may be premature as the euro may be (finally) breaking to the downside.  However, the reason the net speculative position shifted back to favor the longs had more to do with shorts being covered (10.5k contracts) than longs being added (7.6k contracts).  Except for the Mexican peso, the other currency futures all saw a reduction of gross short positions.  Given the subsequent price action, this could be a  sign of the capitulation of the bulls.  

 

2.  This past reporting period saw more large (more than 10k contracts) position adjustments than has been experienced in several quarters.  Like the euro, the yen and Canadian dollar saw large declines in the gross short positions (25.9k and 11.0 k respectively).  The decline in the gross short yen position was the largest since July 2012.   The decline in the gross short Canadian dollar position is the largest in six months. Reflecting the contagion from the risk-asset sell-off, the gross short Mexican peso positions jumped by 25.7k contracts. 

 

3. The gross short yen position has been reduced consistently since the last two weeks of December.  Now with 102.2k short contracts, it is near three-month lows.  The dollar is near 2-month lows against the yen.  

 

4.  The net long sterling position increased by about 13.5k contracts, due in roughly equal measure to longs joining and shorts covering.  At 22.2k contracts long, it is the upper end of where it has been since Bear Stearns failed.  It has been larger for only around a dozen weeks since then.  The gross long position (63.4k) is also at the upper end of where it has been since the onset of the financial crisis. 


    



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