Yuan v/s Rupee

On day's like today all the blame for the INR falling will be laid up on the CNY falling and the trade war. But if it was only for the trade war then India should not have been in the fireworks at all. US tariffs should push up the dollar and Chinese import bans should push down the dollar. Neutralised. But then the CNY is not a completely free floating currency and the big devaluation this morning can be seen as a retaliation to US measures. But where is India in all of this? Then look at the MSCI emerging market currency index, it is making new lows. The dollar is getting strong against an entire basket of currencies of which Euro is really a very small part. The strong dollar is a function of low growth in an environment where EM corporate debt borrowing is at record levels. That said devaluations made unilaterally are a form of short term stimulus to the local economies, till trump revolts more seriously.

The chart below makes it apparent that the USDCNY AND USDINR have not always had a close shaving relationship. They were inversely correlated till 2014 after which the bullish dollar trade really became a global phenomena. Still not every move is in lock step. USDCNY today is at a 52 week high, not so for the USDINR. Even when they have moved in tandem, the last two days has seen the biggest move in INR terms relative to the CNY than ever before so it is getting noticed.

A relative chart of the CNY/INR shows you what is really going on in context. Above India was at free will to devalue, as was the rest of the world. China was being blamed for keeping its currency too weak and pushed by US policy to allow it to get strong and free float. However as the whole world devalues china was losing out and decided to give it back. Now over the last 5 years the CNY has weakened far more than the INR and we are actually starting to lag behind. India was also the strongest of currencies among others on a relative basis so understand China's plight. This is a currency war, call it by whatever name you may. It is a silent war on the citizens money, but they will not realise it till inflation becomes a problem.

US 30 Year Treasury Bonds

The T-Bonds went in overdrive and are now close to the 61.8% retracement mark for wave 2 that coincides with the parallel channel for the A-B-C advance. A small down up push in minor wave iv and v on daily charts would complete the pattern to the top resistance. However the thing to note last night was that in the market turmoil bond sentiment went up to 98% bullish, based on the DSI, an extreme that tells us the same thing that we are approaching an important hurdle.

Yen Carry Trade

The Yen carry trade was a popular topic in 2006 when the USDJPY was going down, or the Yen was getting stronger by the day. Why? See what happened in the last week. I was thinking that the pair would go up but as a risk off trade kicked off it went down. What tends to happen in the carry trade is that investors borrow money from countries with a weak currency and low interest rates and take it out to invest in assets around the world. Now in a risk off trade they sell those assets and the money goes back to the home state. The Japanese banks in this case. In fact we cannot rule out a Euro carry trade as well given the near zero interest rates there. So when the whole world was in panic the Euro and Yen were getting stronger. Makes sense? The trendline of the lows at 105 is a key support  if this triangle is to hold, but if it breaks we may go back to test the next swing low of 99 in the months ahead.

BitCoin

In my last post on Bitcoin - here - the 5th wave was considered over and 61.8% retracement in a bear rally was at 13400. Since then prices are in a falling channel that is either an expanding triangle and we have reached the top end of the range in wave e at xxxx, or we breakout of this and head for a double top long term near 20,000. The latter would be surprising given that the underlying technology is already being adopted for use and the coin rejected. But the enthusiasm for the digital coin has not ended.

CRB Index

The CRB index is outright deflationary - breaking trendlines and making lower tops. The silent crash in commodities should be a no brainer on the underlying world economy. Things are still slowing and we have a crisis in overcapacity. Everyone betting on capex and expansion will be surprised at how soon we go from a possible demand exhaustion to a supply glut.

Emerging Market Currencies

The MSCI EM currency index has finally started wave C down. The decline in May where I did feel the same way may have been part of wave B. the subsequent rally ended in a double top that makes it hard to mark that high as 2 of C. So wave B ends there and now wave C down is starting. This chart is unto Friday, so today's big moves driven by the USDCNY are not captured.