Saudi Tasi seems to be holding in a flag type pattern at the top of yesterdays high. Which means to me there is not too much faith in the OPEC chatter and oil is moving higher more likely due to a short covering rally. As you can see the dollar has broken out from the wedge pattern and pushing the DXY up to 97.50. Obviously this is bearish for Oil, Gold, GBP 😛 and emerging markets.
So far EEM investors have given ZERO Fucks on the strong move dollar. If it holds, (which I expect), their will be a good opportunity on the short side in $EEM. In my personal account, I have bought long dated out of the money puts in both EEM and SPX.
Strong dollar does two things to emerging markets, capital flight, causing a devaluation of their currency which makes external debt more expensive. Therefore they must export to the US more goods and services to offset. Countries most exposed are Brazil, Turkey, India, Indonesia, and South Africa.
As I said before, UK export demand to the World. As the GBP fuckery continues, that demand will drop off, leaving the US with the strong dollar as the only game in town, which would have to make up the difference in demand. Eurozone certainly ain’t going to do it, middle east forget about it, South America? NOT! Forget Asia they are the exporters. So who is left? See what I mean? Anyway let’s see if the dollar move holds.
Author Jim Boukis