Macro digest : Quick note: Start of US dollar bull trend?

Are we about to start a new US Dollar bull phase? Probably ……

 

I have for a long time argued that the US is coming into a structural competitive advantage – the reason is the true paradigm shift in the US illustrated by Shale Gas investment which have lowered the price of natural gas to ten year low and hence made electricity cheaper

 

The US 1 Y average price is down from in excess of 8 USD/MMBtu to less than 4 USD/MMBtu or 50% down!

 

Chart 1-  First contract in Nat.Gas Futures w. 52 week simple moving average

 

 

Furthermore this lower input cost seems to have initiated a stable housing market and more importantly an improvement in job data, although some of it is 'statistical arbitrage' – but point is things are improving and more so than in 2012 – We see that two ways:

 

Citigroup's Surprise Index(CESIUS Index – Bloomberg LLP) is coming back up above zero line:

 

Chart 2-  Citigroups Surprise Index (CESIUS Index)

 

 

Likewise, jobless claims and now Non-farm data are both improving nicely:

 

Chart 3-  4-Week avg. Jobless claims

 

 

Finally,

 

A relative reliable indicator for short-term consumer confidence is gasoline prices, which have come down with weaker growth during March and April giving more room for the US consumer and the household economy:

 

 

Strategy:

 

In asset allocation overweight US assets relative to EUR and even Asia.

 

Sell 25% of total position here at spot: 1.3070 (stop 1.3260) – add 25% for each break of: 1.) 1.2940/50 2.) 1.2840 3.) 1.2640

 

The US Dollar is a long-term mean reverting  - don't forget it was 0.8400 in 2000, then 1.6000 in 2008 – Since 2008 EURUSD have registered lower high each year: 2008 – 1.5144, 2010 – 1.4940, 2012/13: 1.3711.

 

Safe travels,

 

Steen

 

Med venlig hilsen  |  Best regards
Steen Jakobsen  |  Chief Economist

 

Saxo Bank A/S  |  Philip Heymans Allé 15  |  DK-2900 Hellerup
Phone: +45 39 77 40 00  |  Direct: +45 39 77 62 23  |  Mobile: +45 51 54 50 00

 

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