Is There a Sentiment Extreme in the Euro as the Fed Looms?

Focus: FOREX

Jack Crooks Image Jack Crooks President, Black Swan Capital LLC

I am not saying the high is in for the euro, but I am saying that if something clicks positively for the dollar tomorrow (July 26), there is a potential for a sharp correction lower as euro price followers to hit the sell button, asserts Jack Crooks of Black Swan Capital.


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Quotable
Why, sometimes I’ve believed as many as six impossible things before breakfast.

—Lewis Carroll, Through the Looking Glass

chart 1

Tomorrow we hear from Janet & Company, aka the U.S. Federal Open Market Committee.  It seems most analysts are expecting a more dovish tone given inflation hasn’t materialized. 

In case you haven’t noticed, economists far and wide are now attacking the Fed of its use of the Phillips Curve as a model for inflation. Economists as far back as Milton Friedman and Paul Volker believed the Phillips Curve was flawed. 

chart 2

Despite the poor reviews for the Phillips Curve, Janet & Company must cling to something; it’s the “give me a model” mentality, no matter its detachment from the real world. 

Some are expecting a repudiation of the Phillips Curve Wednesday and tacit confirmation of the view the Fed has no idea if inflation will materialize.

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