It has been a great week for the USD as it gained against all the majors. The New Zealand dollar was the last market where the futures traders were long. Early in the week, the kiwi bought .8316 cents per USD, but by the end of the week, it was down under the 81 handle. Should the weekly chart close around this level, it looks like there will be some more to the downside. Remember one of the tricks of The Turtles, as taught by Ritch Dennis, was to hammer a weak Friday close, or, if the market is soaring, buy some more. Their theory was markets will continue their momentum. Speculators, according to last week's COT report, were big longs in this very small market. This could get ugly.

We doubt, however, it will get as ugly as has the AUD versus the USD (AUDUSD, FXA), Two weeks

Last weekend I ran into an interesting article in The Economist entitled "Mend the Money Machine". The article refers to the shortage of European bank funds to finance small and medium sized business in Southern Europe. Normally, I feel this magazine is a bit haughty, but this article seems to present a valid reason why the eurozone is one unhappy family.

In America, they claim the small and medium size (SMES) businesses make up half of the jobs. During a business recovery period, they are generally the first to make new hires, and thereby expand business. In Europe, the SMES play an even bigger role in the economy. In France, SMES are about 60% of the workforce. They are 67% in Spain, and 80% in Italy.

Typically, the SMES firms do not have access to capital markets, but rather they rely on banks to finance their operating needs.

Yesterday we were lamenting decisive moves, especially in the euro and the yen, were lacking. What a difference a day makes. In the euro, we did note that trade was becoming congested with triangular trendlines converging. Usually that formation can result in a continuing movement once the trendline has been broken. Such was the case, and the bears quickly took the pair to 1.30 where we had expected some support. A close decisively under the 1.30 handle means that number will be the new resistance.

Since we are now trading at 1.2970, that support has vanished. Perhaps this is because of a bearish virus affecting other markets. Gold has taken another nasty tumble, currently down $47 at $1422 per ounce. Almost all metals are lower, and WTI crude is down $2.47 a barrel to 93.92.

Some of the observers claim it is because of the stronger USD. Possibly, but

Since the EURUSD (FXE, UUP) made a spike low of about 1.2850 in early April, the euro has forged a steady recovery. It has not been dramatic, but the bears have paid a price. The short side of this pair has been popular with specs. In the futures market, the COT report showed the specs to be short 82,289 contracts on April 2nd. At that time, the spec short was large, though not as big as short positions in the yen and the pound.

During the period from early April until the May 1st -- a high of 1.3240, almost 400 pips from the swing low -- the spec short has naturally reduced his position. The surprising thing, however, is that he remains short 39,377 contracts. But perhaps these are merely new shorts replacing the ones who had enough pain.

New euro shorts are not hard to recruit. After all,

Once again, the U.S. Labor Department delivers a surprise in the most recent NFP report. Following last month's low number, the experts all reduced their guesses for the new report and, of course, the number 165K new hires exceeds all expectations.The unemployment rate slipped to 7.5%, and the NFP from last month was revised upward from 88K to 138K. Perhaps these numbers confirm the reductions in the first time unemployment claims, which suggested the soft U.S. economic data was not right.

Equity markets are elated with the trend of new job creation. The S&P 500 raced through the 1600 handle to 1618 at this time, a new record high. Flush with access to the liquidity provided, courtesy of Bernanke & Co., the brokers and investment bankers are enjoying the day. Best to enjoy the moment, because every good report takes us closer to the day when the Fed will start

Selling the yen has been a big winner this year.

Actually, the move commenced in October when traders began to recognize the new Prime Minister might be Abe, a proponent of aggressive monetary expansion. For years, the Japanese had been trapped in a deflationary spiral and no economic growth. Abe's cure for the moribund economy was straight from the Keynes textbook. Have the Bank of Japan increase their balance sheet, buy Japanese Government bonds, thereby increasing the money supply would be the answer.

Against the USD, the move commenced around October, first when the pair was trading under 78. In the seven months that followed, the USD moved up to the cusp of the 100 handle. Failure of the market to conquer the 100 handle has caused a sell-off toward the 97 level.

Does this mean the bear move in the yen is over?

No doubt part of the yen

If you don't like this price, wait, because it will change. That is how the euro is trading has been trading today. Early in today's session, the euro was working higher, perhaps because Angela Merkel said higher interest rates were good for Germany. Trade in the euro had been been weaker, anticipating a reduced ECB rate, so this was unnerving to the bears. The EURUSD rallied close to the 1.31 handle and then got whacked, selling off about 100 pips.

The catalyst for the sell-off was comments by Goldman Sachs. They expect a 25 basis point cut in the ECB bank rate at the meeting on the 2nd of May. They note this drop is "largely cosmetic" and they feel it will have little impact on the economies of Europe. Goldman also reduced the euro area GDP estimate to -0.7% from -0.5%.

Earlier today, the Spanish unemployment rate was

Years ago a veteran trader, well into his eighth decade, gave me an order to buy 100 contracts of Kansas City wheat. Though grateful for the order, I wanted to make sure this old boy was still lucid because the wheat market had been going nowhere. So I asked him to confirm the order and tell me his reasoning. He replied, "Ralph, sometimes when a market cannot go down, it goes up." He had to hold the trade several months, but he ended up with a big winning trade.

Watching the recent euro trade has prompted me to recall old Eddie Byers' advise. Tuesday the German Manufacturing PMI was released, a bearish 47.9, well less than the expected 49. The German Services PMI at 49.2 was also well short of expectations at 49.2 instead of the anticipated 51.

Recently the euro had been visiting the 1.30 handle, where it would

How has the rookie Bank of Japan Governor Haruhiko Kuroda been received at his first G20 meeting in Washington this week? Kuroda was appointed by PM Abe in March, at which time he claimed his goal was to end deflation. Rather, an inflation rate of 2% was to be achieved in two years, a sharp departure from previous years. Achieving that goal will involve increasing the balance sheet of the central bank, buying Japanese bonds and other paper.

The threatened vigorous expansion of the yen supply has frightened the currency markets and caused a flurry of investment repositioning. No longer are investors using Japan as a safe haven in times of apprehension. Equity investors are pouring money into Japanese stocks, but the managers of the debt are sending their yen to Australia, Korea and Italy in search of yield.

Until 2003, Kuroda was Japan's top currency official. That experience, claim

After chasing out euro shorts yesterday, running the EURUSD well above the recent recovery to a new high slightly above 1.32, the pair has reversed today. The euro's behavior had been baffling, considering the weak economy, the arrogant ending to the Cyprus crises, and the increasing European hostility to the austerity solution as proposed by Chancellor Merkel and her Finance Minister Wolfgang Schauble.

Despite increasing evidence the Troika's remedy, which had the blessings of the Germans, was harming the economies in many of the single currencies users, there was no deviation from the plan. Now, with some evidence the German economy is about to be harmed there may be some changes, at least in ECB Monetary policy, in the near future.

Last week Lorenzo Bini Smaghi, a former member of the executive committee of the ECB may have planted the seed when he offered his advise in his blog on

By now the Japanese savers have been fairly warned - their savings, the portion not invested in Japanese stocks, had best be parked elsewhere. The Japanese have trillions of dollars of savings, so where is the accumulated wealth to be allocated while PM Abe and friends flood the markets with newly printed yen?

Conventional investment banker wisdom touts local equities and commodities. The run up in the Nikkei 225 to the top side of 13,500 from under 8600 in mid November has been good advice. Gold and other commodities are weak, but really, commodities and equities are hardly suitable for the aging Japanese savers.

Some Japanese yield seeking investors are rumored to be buying bonds in the developing world, including Korea, Thailand and Mexico. Australian debt has also been attracting some foreign demand, partially responsible for taking the yield on the 10-year Aussie bond down over 30 basis points to

Whether the Canadians like it or not, their economy and that of the U.S. are bound together, though not with a single currency. The under-performing countries in Europe are locked into a single currency, unable to recover from a competitive vantage with a weaker exchange rate. Considering the recent economic numbers from Stats Canada, this could be the time when Canada will be better served if her currency were to trade at a discount to the U.S. dollar.

Last Friday, the U.S. unemployment percentage -- the number of Americans who have dropped from the work force -- and the Non-Farm Payroll report dominated that day's news and analysis. Canadian numbers released that day, though important, received far less attention.

To review, the employment numbers came in far less than expected. Falling of out of employment during the period were 54.5K people, and the unemployment rate went up from 7% to

Today's NFP Report continued a string of US reports that fell short of expectations. According to this report, only 88K jobs were created in March, far less than the 190K estimated. They did upwardly adjust the February numbers from 236 to 268, and the Jan number went up from 119K to 148K. The markets, however, are moved by headlines, not foot notes so this number put pressure on equities and the USD.

Briefly, the reduction in the unemployment rate to 7.6% gave the bulls some satisfaction until the details were examined. There was a reduction of 663K Americans who gave up the job search, joining the ranks of the permanently unemployed. The number of those of who are of working age, and still in the workforce, is now down to 63.3%, the lowest since 1979.

The US Trade Balance was still a big deficit, -$43B, but less than forecast. This

Today was an especially busy day for the Central Bankers. At 6:30 a.m. London time, the new BOJ Governor Kuroda gave the first Central Bankers Day report. Recently there had been skeptics, fearful the BOJ might revert to the previous timid policies. This, according to Nikkei, was untrue:

"We cannot achieve the inflation target as long as we take policy steps in an incremental manner" as the previous BOJ leadership had done, Kuroda said at a press conference after the end of the BOJ's two-day Policy Board meeting.

The amount of funds the BOJ plans to provide to the financial markets under a new monetary easing scheme is "large beyond the common sense," he added.

Kuroda, however, said, "We'll adjust (monetary policy) without hesitation if necessary, while monitoring economic and price conditions."

This proved to be the CB's version of shock and awe. The early trade in the yen

Recent economic numbers from the U.S. suggest the recovery may not be as rosy as desired. This string of disappointments began with the U.S. durable goods report, and goes from there to numerous U.S. economic reports that fall short of expectations. Today we had the USD ADP Employment Change at 158K, which was well short of the anticipated 200K. Following came the U.S. PMI-ISM Non-Manufacturing Component, which was also short of the expected.

This Friday we can look forward to the U.S. unemployment rate, expected to be unchanged at 7.7% and the always interesting U.S. Change in NonFarm Payrolls. The 195K expected new NFP jobs is down from last month's 236K. The headline number for the NFP is what gets the crowd's attention, and the market is quick to respond.

Often habitual traders first trade and then analyze. Last month, the big number was caused by an addition of part

Late Friday afternoon, the CFTC releases its latest report of the Commitment of Traders. This report, as most of you know, summarizes by futures contract the increases or decreases of futures positions held by commercials, and large and small speculators. We review the futures and delta adjusted option positions of the major currencies. If a market has been advancing and we know from the previous report the specs are buying, then next week, if the market continues to move higher, we then know specs are buying more.

For example, yesterday the open interest in the euro futures was up 15,496 contracts to a new total of about 220K contracts. When we refer to last week's report, we find that the spec is short the euro, to the tune of 53.4K contracts. The biggest share of this short is held by the large specs. So if the open interest (OI) was

Prime Minister Shinzo Abe's main man in the deflation fight, Haruhiko Kuroda, takes his position as the new central bank governor for the Bank of Japan (BOJ) next week. If we are to believe the action of the yen in the currency markets, the Abe-Kuroda team is headed for the monetary hall of fame.

The problem with the Japanese economy has been deflation. According to the Wall Street Journal:

"Since 1998, Japan's consumer prices have dropped to 1992 levels. Wages are down 7%. Urban property prices are down 51%. Tax revenues are down 14%."

Deflation hurts the economy in many ways. Consumers postpone purchases, waiting for cheaper prices in the future. Economic growth slows as do tax receipts. The biggest problem, however, is that debt must be paid off with more valuable money. Japan, with sovereign debt about 245% of GDP, cannot afford to repay this debt with a more

Trade in the euro has calmed today after yesterday's volatility. The aftermath of the latest Cyprus solution has waned. The calm does not belie the disagreement that exists, and the frustration on both sides. Der Spiegel described the split quite well:

"While many in the north question the willingness of politicians in Rome and Athens to bring about reform, citizens in the south are increasingly furious over the austerity diktats from Berlin, Brussels and Frankfurt."

Perhaps that summarizes the personal frustration, the devastation of those in the South, and the anticipation of more bail outs by the North, but what are the precedents that have been established? Does this mean, as Dutch Finance Minister Dijsselbloem so arrogantly asserted, this will be the model for future bail outs? The large saver funds will be confiscated to rescue insolvent banks. Is it not ironic that the Cyprus banks are insolvent because

It seems like Cyprus has been the center of attention for the entire week. This tiny country has had the reputation of a financial center, which, as such, accounts for 25% of the country's GDP of around €20B. If financial centers are going to remain viable, stability and trust are needed. Each new story about the Cyprus insolvency serves to tarnish the country's reputation as a reputable financial center, increasing the probability of a messy ending.

The future is bleak, but this is not new. The three biggest financial institutions, according to Der Spiegel, had a valuation of €2.4B in the fall of 2011. Now the value is down to €500M, so investors have already taken a big hit. Deposits, according to statistics from the same source, were estimated to be €68B, with about €25B from Russia and the Ukraine. Why depositors would deposit such large sums in banks

Following the expiration of the currency futures each quarter, we like to analyze the remaining volume of open contracts. In doing so, we attempt to glean information about trader participation and preferences in the currency markets.

Granted, the futures trade is a mere fraction of the cash forex trade, but that trade is not visible. In the forex market, there are many different players, and electronic trading is practically invisible. Market observers only hear about trades that someone wants you to know about; swaps the central bankers are making, and currency interventions are reported well after the trades, if at all. Further, the addition or liquidation of a currency from a central bank reserve status does not show up for months after the trade.

Toward the end of the expiration of a futures contract, there is often frantic activity. Decisions have to be made about existing positions. Are the positions