Well, the big news this morning, is that the Jobs Jamboree was just awful, but “not as bad as some forecast” and therefore the dollar rallied. OK, I’m shaking my head in disgust too, but that’s what the headlines reported later in the day on Friday, as the reason for the dollar rally. But let’s get to the meat of the Jobs report… First of all, jobs lost in December were -525K, which was bang on the forecasts. But here’s the two things I found to be very scary in the report… First of all, November’s awful print of -533K was revised downward to -584K (recall, I questioned a month ago if it would reach -600K on the revision)… And here’s the really scary number… -67K Retail jobs were cut in December… That’s right, December! The month when retailers are supposed to be on fire!

I was very impressed with the network news on NBC with Brian Williams, Friday night, as they did report the numbers as awful, and highlighted the Retail jobs losses as I did above… But then I got to thinking… Who the heck watches network news any more? Oh well, they tried!

Oh… And for those of you keeping score at home… The Bureau of Labor Statistics (BLS) decided that they would ADD 72K jobs in their Birth / Death Model… Makes sense, eh? NOT! So, if they hadn’t put their hands in the cookie jar, the total job losses in December would have been within spittin’ distance of -600K! Any way… The Unemployment rate rose to 7.2% from 6.7%, that’s quite a hefty rise in one month, and is very reminiscent of moves made in previous recessions…

But the dollar rallied, so I’ll leave all that Jobs Jamboree stuff, and move on!

The euro is much weaker as we begin this week than it was last week, and besides the mental giants that marked up dollars after the jobs report, the euro was feeling the pressure from some statements from European Central Bank (ECB) President, Trichet… Yes, it sounded as though Trichet had turned dovish… But then there were denials that he said anything, but it was too late, the cow out of the barn!

The ECB DOES meet this week, on Thursday, and while I once thought that the ECB would skip cutting rates at this meeting, I now, with the Trichet comments even if he didn’t say them (you know me, where’s the smoke, there’s fire!), believe the ECB will cut rates this Thursday, and that is also weighing on the euro.

As we, (me, and you dear, long time reader) know all too well, the euro is the Big Dog on the currency porch… It’s the offset currency to the dollar, which is quite impressive given the fact that it has only been around for 10 years! Anyway… Back at the ranch, dollar strength shows up here with the euro first and foremost… But guess what happens when everyone finally begins to focus on fundamentals again? Well, Oooh! Oooh! Call on me, teacher! Call on me! Yes, you, in the back, what’s your answer? Well, teacher, My answer is that the dollar will come under pressure again, and with the euro being the offset currency to the dollar, this current weakness will be a thing of the past. Very Good, young man, please move to the front of the class!

So… After the dollar performance on the bad news of the Jobs Jamboree, I got to thinking that the Trading Theme that was all so evident… I know, I thought we had put the Trading Theme of second half of 2008, in the closet… But here it is again, all dusted off, and looking as though it might be here to stay… For those of you new to class or in need of a refresher course… The Trading Theme I’m talking about, is the one where the deeper, the darker, the more dangerous things get for the U.S. and the economy, the dollar is rewarded, as dollars are repatriated, and Carry Trades that used the dollar as the funding currency get unwound, thus propping up the dollar…

I’ve seen this before, as I’ve explained before… It was Japan in the late 90’s… Their economy was circling the bowl, and yen was being repatriated, pushing the yen to 88!

These Carry Trades also use Japanese yen as the funding currency… And that goes to explain why Japanese yen is trading so strong again… Last week, with the risk takers dipping their toes in the risk waters again, Japanese yen was weakening… But not now!

This is all bad news for the high yielders, which had really stretched their legs last week! The usual suspects of Aussie, kiwi, Brazil, South Africa, have all been sold again on this return to the Trading Theme which has risk takers pushed to the back corner of the room…

This is as good of a time as any to repeat my thoughts for 2009… ( I did this the last week of 2008) First of all, I believe, we’ll get an Obama bounce, thus pushing stocks back up, and giving everyone a false sense of euphoria… By late spring, this euphoria should all be fading, as people begin to realize that we’re just mortgaging the future with stimulus package after stimulus package… And all that “horded up cash” that investors have been holding on to, will begin to get spent… Then we’ll have a problem Houston, as the Corporations that have slowed production down during the recession, can’t produce enough to meet demand, and inflation begins to soar!

The dollar basks in the sun during the first part of the Obama bounce… But, when the bloom is off the rose, we should see a return to the fundamentals…

OK… This week, we’ve got some hefty data in the U.S. and of course the ECB rate meeting on Thursday. Here in the U.S. we’ll see this week… The Trade Deficit for November, Retail Sales for December, The TIC Flows, the stupid CPI and PPI reports will also print. Sprinkle in the Philly Fed (manufacturing), Business Inventories, and the Initial Jobless Claims, and we’ve got a data cupboard that chock-full-o-numbers!

None of these should be good for the economy, save for the stupid CPI report, which they will try to push off on us a report that inflation fell -.2% in December, and now stands year-on-year at 1.8%… HOGWASH! The boys and girls that print this report think that just because the price of Oil has collapsed, they can mark inflation down to the bone… That’s right, there’s no other inflation going on, not medical, not tuitions, not insurance, not food, not ball game tickets! HOGWASH!

After all that, there is no data scheduled for printing today! I hear that Big Ben Bernanke is going to speak on “The Crisis and the Policy Response” at the London School of Economics tomorrow. Oh boy! NOT!

OK, before I head to the Big Finish… I wanted to give you a piece of my friend, Bill Bonner’s, Daily Reckoning (www.dailyreckoning.com) from Friday, as he discussed the massive amounts of stimulus that have been put in place and the massive amounts yet to be put in place… Here’s Bill…

“When America’s economy was young and competitive it survived slumps and crashes without medical intervention. Now, every passing cold requires feeding tubes. And this latest bout of influenza has the doctors in a panic. They are casting aside warnings and giving the patient masses doses of the old quack treatments. They’ll increase the dosage – until they run out of supplies – and then switch to those new, experimental medicines that have recently been used in field trials by Dr. Gono in Zimbabwe.
Since they cannot leave well enough alone – the public won’t stand for it – they will keep giving bigger and bigger doses, of more and more dangerous medicines, until the patient dies.”

Currencies today 1/12/09: A$ .6845, kiwi .5790, C$ .8340, euro 1.34, sterling 1.4955, Swiss .8940, rand 10.02, krone 7.0550, SEK 8.0450, forint 208.20, zloty 3.02, koruna 19.83, yen 89.80, sing 1.49, HKD 7.7540, INR 48.84, China 6.8370, pesos 13.69, BRL 2.2940, dollar index 82.93, Oil $38.70 (Oil is collapsing once again!), Silver $11.11, and Gold… $844.50

Source:  A Jobs Disaster!

Well, front and center this morning is a rally in the currencies that began yesterday mid-morning, and has carried through the Asian and European markets. I’d tell you why the euro is 2.5 figures above yesterday morning’s level, but you’d laugh at me… No wait! That’s what you’re supposed to do, Chuck, tell the people what’s going on! HA! Seriously though… I don’t think you’d laugh at me, maybe the dolts that run trading floors around the world, or the pundits that write stories about the markets, but not me!

Here’s the skinny… Yesterday, I told you about how the markets were convinced the European Central Bank (ECB) was going to follow the Fed and reduce interest rates this week on Thursday. I also told you that I DID NOT believe the ECB would cut rates, right? OK… Well, yesterday, and I don’t believe for one minute that these guys read the Pfennig and said, “Hey, that Chuck Butler says the ECB won’t cut rates, we had better change gears”… But, yesterday, the thought that the ECB would lag the Fed with interest rate cuts began a whispering campaign, and before you know, there’s a headline story on the Bloomberg, say just that!

Fickle dudes, eh? One day they think this, the next day they think that. To think it is one thing but to spew it all out for everyone to read, is another! I know, I know, I change my mind sometimes, and I’m always reminded of the saying by John Maynard Keynes…”When the facts change, I change my mind. What do you do, sir?”

So… Anyway, back at the ranch, the euro is rising again, and the Aussie dollar is trading above 72-cents for the first time in three months! I’ve explained why this is going on, but in case you missed class that day… The Obama bounce, is giving a warm and fuzzy to the risk takers, and when risk comes back on board, the high yielders get a huge boost… Aussie, kiwi, reals, rands, they, even though their interest rates have been cut off at the knees, are still considered “high yielders”, and therefore, get all the love and attention, when the risk takers come on board…

U.S. stimulus spending is all the rage in the high yielders and the emerging markets, who have been beaten about the head and shoulders for far too long now! Yes, stimulus spending could be the key master to all that ails the world’s economic engine here in the U.S…. But at what cost?

I know, I know, you don’t want me getting on my soapbox and carrying on about the rising debt in the U.S. and our national debt going into the stratosphere, so I won’t… Not today…

There’s been a particular pattern going on in Gold that I think is worthy of mention. You see, yesterday a saw a story about Gold, and I decided to run a graph on what I thought had been happening, and the chart confirmed my thoughts… You see, Gold has been in a pattern of rising to fresh highs, and then falling back, but the falling back sees the lows at higher levels each time… A stair step if you will… Here’s a look at what I’m talking about…

In the past 3 months… Gold hit a low of $712.30 on Nov. 12, and rose to $821 to Nov 25
Then fell to $$756 on Dec 5, and rose to $852 on Dec 18.
Then fell to $846 on Dec 25, and rose to $882 on Dec 31.
The fell to $859 on Jan 5…

Where will it rise to this time? $900? Difficult to call, but this type of pattern usually indicates that each fall back in price (but to a higher low) creates a new base from which an asset can move higher. So, with that in mind, the outlook for a higher price in Gold in this pattern is possible.

Of course, $900, is a far cry from those that believe that Gold will get to $2500. But, I like small steps in assets, that way, it allows investors to still jump in without the asset getting away from them and then they chase the price higher and higher. Again, though, I shiver at $2500 Gold, because, if Gold is $2500, I can’t imagine the condition of the U.S. economy and the dollar…

The data yesterday in the U.S. was a mixed bag of bad stuff for the economy… The most important print was the ISM (non-manufacturing) Index. Recall yesterday I told you that the most important component of this report is the Employment component, which is my “secret” indicator of the National Jobs report (Jobs Jamboree). So… A quick look at the employment component indicates that the Jobs Jamboree, on Friday, will be close to negative -500K… This is what the “experts” are forecasting right now, and for once in a Blue Moon, I agree with them… Although, to me, I want to see the color of the November revision, which I explained all about the other day… Will it be -600K?

Factory Orders printed worse than expected yesterday… Factory Orders for November, collapsed 4.6% (remember the “experts” forecast -2.3%), and the prior was revised lower from -5.1% to -6.0%. I think that the back to back decline represents the biggest since data began in 1992.

The mixed bag part came in the form of the ISM (non-manufacturing) Index which measures the pulse of the Services industry, and for the first time in 4 months it did not contract. The index rose to 40.6… However, this is the 3rd month of below 45, which I’ve explained in the manufacturing side of this report indicates recession…

The Labor picture in Germany took a hit this morning, as the unemployment rate ticked up to 7.6% in December. You see, the Germans don’t have the Bureau of Labor Statistics (BLS) to help them out each month with “cooked books”… If the U.S. unemployment rate was accurately calculated it would be much higher than the 6.7% the BLS gives us, and wants us to believe…

Anyway… I didn’t mean to have that turn into a discussion about the BLS, I wanted to point out that even with a sour report like that in Germany this morning, the euro is rallying…

Speaking of unemployment… Did you see that ALCOA announced that they would cut its work force by about 15,000, or roughly 14.5% of its current employees and contractors. It also plans salary and hiring freezes, more plant closures and production cuts, and a 50% cut in capital expenditures? I did, and if that right there doesn’t illustrate the dark clouds over the global economic picture, nothing does!

One currency in Europe that rallied like there was no tomorrow, yesterday was the British pound… Before I knew it, the pound was taking names and pushing higher. This has to be a “cross thing”, because there’s nothing, nada, zero, zilch, in the way of good news from the U.K. economic and financial problems… So, when I talk about a “cross thing” I’m simply talking about how the currency “pairs” get crossed against other currencies, and in the end, a particular currency, which is a part of a lot of “pairs” gets marked up… Or down… It can go both ways… But in the pound’s circle, it got marked up yesterday… But, I just don’t think the pound can hold these gains… The Bank of England (BOE) WILL cut rates tomorrow, and before you know it… Voila! A weaker pound once again.

Here lately, it seems that I’ve highlighted a “Currency of the day”… I don’t want to keep going with that, because it could become a real pain to come up with a “currency of the day”… For now, I’m highlighting currencies that have BIG moves in a day… If I carried on with a “Currency of the day” I could be stuck highlighting a currency that moved .1%! UGH! So, I’ll steer clear of that one…

So, the latest on the Madoff scandal as reported by the Wall Street Journal… “Ten days before his arrest, Bernard Madoff received $250 million from a man who helped give him his start on Wall Street, a move that shows how the investment manager tried to raise cash to stave off his firm’s collapse.”

Geez Louise, how’d you like to be the guy that gave Madoff $250 Million and watch it go away, and the guy get carted off to jail? (well not yet) I guess if you have $250 Million to “give away” there’s more where that came from, eh?

Currencies today 1/7/08: A$ .7210, kiwi .5965, C$ .8455, euro 1.3630, sterling 1.4955, Swiss .9090, rand 9.40, krone 6.9350, SEK 7.7975, forint 195.50, zloty 2.9120, koruna 19.25, yen 93.20, sing 1.4715, HKD 7.7525, INR 48.76, China 6.8335, pesos 13.35, BRL 2.2070, dollar index 82.29, Oil $48.29, Silver $11.38, and Gold… $864.25

Source: A Trading Pattern For Gold

Gold fell more than 2 percent on Tuesday as a stronger dollar dented the precious metal’s appeal as a currency hedge, but the platinum group metals rallied as investors hunted for bargains.

Spot gold was quoted at $846.50/848.10 an ounce at 1444 GMT, down from $858.90 late in New York on Monday. However, it lifted off an earlier low of $838.55 as the dollar trimmed gains against the euro after a raft of U.S. data at 1500 GMT.

U.S. gold futures for February delivery on the COMEX division of the New York Mercantile Exchange were down $10.10 at $847.70.

VM Group analyst Matthew Turner said investors were looking to the currency markets for direction. “A lot of news on physical demand has been quite poor, and that might also be weighing on prices,” he added.

The U.S. currency rose against the euro after a flash estimate of euro zone inflation data came in weaker than expected, increasing pressure on the European Central Bank to cut interest rates.

Analysts said the prospect of an ECB rate cut at the bank’s next interest rate meeting on Jan. 15 was pressuring the single currency, and consequently gold.

A firm dollar reduces gold’s appeal as an alternative investment. However, the U.S. currency trimmed gains versus the euro after data showed U.S factory orders and pending home sales dropped by more than expected in November.

DEMAND FIRM FROM FUNDS

But while the stronger dollar and reports of lackluster jewelery sales weighed on prices, demand for the metal from exchange-traded funds — which issue securities backed by stocks of physical gold — remains firm.

ETF Securities, which operates Europe’s largest gold-backed ETF, said holdings of its Physical Gold exchange-traded commodity rose 2 percent in the week to January 2 to 1.899 million ounces.

Holdings of the world’s largest bullion ETF, the SPDR Gold Trust (GLD), held at a record 780.23 tonnes on Monday.

“Gold is holding (where it is) because of investment demand for gold ETFs, rather than demand from the physical side or as a hedge against the U.S. dollar,” said Commerzbank analyst Eugen Weinberg.

Firmer oil prices, which are holding just below $50 a barrel as supply fears were fuelled by Israel’s incursion into Gaza and a dispute between Russia and Ukraine over natural gas, also lent some support to gold.

Among other precious metals, platinum and palladium rallied to multi-week highs, shrugging off a spate of poor vehicle sales news from car makers, the major consumers of the metals.

Spot palladium was the main riser, climbing 8 percent to a six-week high of $198.50. The metal was later quoted at $194.50/199.50, against $183.50 late in New York on Monday.

Platinum also climbed more than 2 percent to $967.50, its highest level for three months. It was later at $958.50/963.50 an ounce against $946.

“With the commodities basket, people are shifting out of gold and into other commodities that have been under performing lately,” said Commerzbank trader Rory McVeigh. “And palladium is probably the biggest underperformer of the market.”

Spot silver eased to $11.11/11.19 an ounce from $11.22.

LONDON, Jan 6 (Reuters)

The dollar rose against the yen on Monday after the Bank of Japan followed last week’s interest rate cut with a warning that the health of Japan’s economy has deteriorated and is likely to get worse.

But investors’ equally dim view of the U.S. economy hurt the greenback against the euro, which rose broadly in holiday-thinned trade. Doubts about whether a U.S. automaker bailout would steer the economy out of recession also hit the dollar.

Traders said volumes were razor-thin in the lead-Up to the Christmas holidays, aggravating even the slightest moves in the currency markets. Still, many said demand for dollars remained low.

“The dollar view is so opaque at the moment, and the risk reward at this time of year is not worth it unless you really have to trade,” said Maurice Pomery, head of foreign exchange at IDEAglobal in London.

The dollar managed to rise above 90 yen for the first time in nearly a week after BoJ Governor Masaaki Shirakawa said yen strength and a global slowdown may force Japanese exports still lower even after a record plunge in November.

“All Asian exporters are at risk in this global economic slowdown, but Japan is at the top of the list,” said Dustin Reid, senior currency strategist at RBS Global Global Banking & Markets in Chicago. “The stronger yen has been playing havoc for Japanese exporters, and the auto companies in particular are likely to be significantly affected.”

So far this year, Japan’s currency is up nearly 20 percent against the dollar and more than 22 percent against the euro.

Early in New York, the dollar was changing hands at 89.85 yen , up 0.8 percent, after earlier rising to 90.23. The BoJ cut Japanese interest rates last week to near zero.

The euro also rose 1.3 percent to 125.79 yen after earlier hitting a session peak of $1.4123. Sterling fell 0.8 percent to $1.4814 , while the euro rose 1.1 percent to 94.35 pence , near a record high of 95.56 pence touched last week.

A move by China’s central bank to cut lending and deposit rates by 27 basis points — its fifth cut since September — shed more light on the scope of the global slump.

GRIM U.S. OUTLOOK

After coming under steady pressure in December, the dollar rallied on Friday after the Washington announced emergency loans for crippled General Motors and Chrysler.

But while the move averted a crisis for now, traders said uncertainty over the companies’ restructuring plans left many doubting the long-term effect it would have on the economy.

Last week, the Federal Reserve cut benchmark interest rates to near zero, underlining the severity of the economic crisis and undermining support for the dollar.

Investors are also looking for the European Central Bank to cut interest rates, currently at 2.5 percent, in January, though ECB executive board member Lorenzo Bini Smaghi warned about the risks of monetary policy being too lax, according to the Rome newspaper Il Messaggero.

Steven C. Johnson, Reuters 12/22/08

The euro hit a six-week high against a broadly weaker dollar on Thursday with doubts creeping in as to whether pent-up demand for the U.S. currency over the year-end will be as strong as previously thought.

Implied interest rate spreads also moved in the euro’s favor after European Central Bank Executive Board member Juergen Stark said late on Wednesday the bank did not have a lot of room for manoeuvre on rates after its cut last week.

Having climbed on a wave of risk aversion in recent months in tandem with the low-yielding Japanese yen, some analysts said further dollar demand into the year-end from deleveraging flows might be showing some sign of cooling. A fall in volatility also indicated that extreme risk aversion may be easing.

“We’re seeing some year-end position adjustment. With volatility coming down, it may prompt some investors to dabble in risk,” said Geoffrey Yu, strategist at UBS in London.

By 1150 GMT, the euro was up 1.1 percent on the day at $1.3171, having hit a six-week high of $1.3186 earlier in the session.

Implied volatility on one-month dollar/yen currency options fell below 20 percent on Thursday compared with that level seen at the start of the week .

The single currency spiked late on Wednesday after the Stark comments, while implied euro/U.S. rate spreads reflected a cooling in ECB rate cut expectations. By contrast, the U.S. Federal Reserve is expected to cut borrowing costs again next week.

“If the euro zone is being perceived to still have rates at substantially higher levels then obviously there’s a positive rate spread, but I’m not convinced that its ultimately going to be positive as the dynamics of the euro zone economy are pretty weak,” Rabobank markets strategist Jeremy Stretch said.

Against a basket of currencies, the dollar was down 1.0 percent at 84.604, while it also dipped 0.4 percent versus the yen to 92.18 yen .

The Swiss National Bank became the latest leading central bank to cut interest rates, but its impact was limited as the 50 basis point move paled in comparison with more dramatic reductions from other central banks last week.

The dollar traded up at 1.1927 Swiss francs compared with 1.1905 francs just before the SNB rate decision, and the euro rose to 1.5713 francs from 1.5625 francs .

CRACKS IN GLOBAL PLAN?

There was little reaction in FX markets to the approval of a $14 billion auto industry bailout plan by the U.S. House of Representatives.

While the House stuck to its plan, uncertainty was seen in the Senate, where a razor-thin Democratic majority cannot ensure passage. A vote could come as early as Thursday, but some Republicans have vowed to slow or even block the legislation.

Elsewhere, cracks were appearing in the global effort to drag the world out of recession on Thursday with Germany attacking Britain ahead of an EU summit for rushing into debt to bail out industries and pump up growth.

In an interview with Newsweek magazine, Finance Minister Peer Steinbrueck urged governments to pause before pledging to spend billions of dollars to try to push their economies out of trouble.

By Tamawa Desai

LONDON, Dec 11 (Reuters)