The Euro and Cattle Futures Follow Through – Signalling Inflation Incoming

By Tom Luongo in Currency Articles, LiveWire Economics Blog | December 27, 2012 1:27 | Tags: , , ,

Last week’s close in both the EURUSD pair, $1.319, and Cattle Futures, $133.64 per hundredweight, marked breakouts for both markets.  The Euro broke through a quadruple top at $1.317 on the weekly chart pushing past $1.32 last week but couldn’t hold it.  During this, the last week of the year, the EURUSD pair pushed again past $1.32, following through last weeks’ bullish breakout signal.  If this holds through the end of the month that would put the Euro on good footing coming into 2013 to regain the $1.35 and probably the $1.40 level.

In a similar vein, Cattle futures have been steadily rising since bottoming out in March.  Last week traders were finally able to retrace the entire drop at the end of February and March to put in its highest weekly close ever.  Both of these moves are telling you quite clearly that the Dollar is on very weak footing coming into 2013, especially with the situation seemingly deteriorating in Washington D.C.

Since the Keynesian Multiplier effect rules the thinking inn both Washington and the FOMC the worry is that if both the central bank and the central government are not on the same page going forward positive GDP growth cannot be achieved. This is true enough if you believe that GDP is the end-all be-all of economic activity.  It isn’t but it’s the great fiction of the age that dominates policy.  GDP is a number that can be goal-seeked by those in charge of the money supply and government spending.  Because of that, it invalidates GDP as an economic indicator having any association with real economic activity.


About Tom Luongo
Tom is a professional chemist and self-taught economist who has been following and trading stocks for nearly 12 years. He has no formal ties to the financial industry and considers that an asset in his analysis of the interplay between monetary policy and capital markets.

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