Monday, March 24, 2014

Yellen comments boost US Dollar

(24 March 2014)  Fed Chair Janet Yellen threw the US Dollar a life preserver last week.  Yellen's off the cuff remark that the Fed could raise interest rates just six months after ending its QE program later this year caught markets by surprise as it was sooner than many expected.  Stocks and gold sold off and the Dollar took flight on anticipation the higher rates may be on the way as soon as early 2015.  Despite the threat of higher rates, the Fed is maintaining its zero interest rate policy for the foreseeable future and will likely only raise rates if there is more weak economic data to justify such a move.  As long as official core inflation remains below 2% and growth is sluggish, the Fed has promised to keep the cost of borrowing money as low as it can. 

But the question is whether Yellen's comment was a rookie mistake or a sign of an evolution of interest rate policy as the Fed seeks other means to support the US economy.  More pointedly, is the Dollar going to extend its rally against other world currencies as more investors anticipate higher US interest rates?   My analysis suggests that the Dollar may have turned the corner as it is likely to strengthen in the weeks and months ahead against a backdrop of rising interest rate expectations. 

Ideally, we could look for confirmation in the horoscope of the US Dollar.  Alas, no such chart exists.  The Dollar was created by a legislative act in early 1792 but the exact timing of it is unknown.   As a proxy for the Dollar, I have found it more useful to use the horoscope of the Euro which is better documented and then infer the converse movements of the Dollar from that chart.  While several starting times are possible for the Euro, I have found that its legal inception at midnight on January 1, 1999 works fairly well. 

We can see how afflictions to the Euro chart corresponded closely with the sudden rally in the US Dollar after Yellen's comments.   Transiting Mars (1 Libra) is exactly square the natal Venus (1 Capricorn).  This is usually a negative influence although due to the relatively slow velocity of Mars in its retrograde cycle, this aspect was in effect for several days.  Transiting Ketu (4 Aries) is conjunct natal Saturn (3 Aries), although here again the slow motion of Ketu (South Lunar Node) means that this influence was in effect for several days (if not weeks) and was not specific to the day of the Fed meeting.  But the transiting Sun does move more quickly at one degree per day and we can see that the Sun had aligned exactly opposite the Ascendant of this chart.  This highlighted the Ketu-Saturn affliction since the Sun formed an alignment with Ketu/Rahu on a transit basis, irrespective of the natal chart.  The fact that this Sun-Ketu alignment occurred in aspect with both the Euro's Ascendant and Saturn made it have that much more impact. 

This chart also suggests that the recent strength in the Euro in February and March may not continue into April.  The Euro had strengthened in February and early March likely due to the extended Jupiter-Uranus aspect which activated the natal Sun at 16 Sagittarius.  The Euro peaked just under 1.40 a week after Jupiter stationed on March 6th and resumed forward motion at 16 Gemini while in exact opposition aspect to the natal Sun.  Jupiter is a positive influence here with Uranus mostly supporting this strength in the Euro and weakness in the Dollar.  But now that Jupiter and Uranus are both moving away from their aspects with the Sun, I would think that the Euro will be more susceptible to declines.  Since the US Dollar Index is overweighted for the Eurodollar, this means that the Dollar is more likely to rise as Jupiter moves further from its station at 16 Gemini. 

The other good news for the US Dollar is that transiting Ketu will remain in close conjunction with natal Saturn in the Euro chart (and in alignment with the Ascendant) for several more weeks.   In fact, the true node measurement for Ketu has it exactly conjoining Saturn in mid-June.  Since both Ketu and Saturn are considered bearish influences, it suggests that the Euro is likely to weaken further between now and June.  Therefore, the Dollar looks likely to extend last week's gains in the weeks ahead. 

Financial Markets Update

While stocks declined after Yellen's comments, US stocks actually rose for the week with the Dow closing at 16,302.  Indian stocks edged slightly lower with the Sensex finishing at 21,753. The mostly bullish outcome was in line with our expectations as the early week Venus-Jupiter aspect did coincide closely with gains.  I also noted that the Sun-Rahu aspect fell on the day of the FOMC meeting and that it might be less than positive.

This week looks like a mixed picture.  Monday's saw gains in Asia for declines in the US and Europe.  The midweek Mercury-Jupiter aspect looks quite bullish generally but Mars enters Virgo this week and then aligns with Saturn by Friday.  This would seemingly limit any upside and also increase downside risk.