St. Louis Fed President, James Bullard, a supposed hawk, has been bullying the "single" currency bears into temporary submission ahead of today’s FOMC meeting minutes or at least he should be held responsible for getting the ball rolling. Yesterday, he suggested that the most appropriate policy for the Fed is to continue the current QE3 policy. Dovish comments from the voting hawk has put the "mighty" dollar under pressure when the market least expected it when he mentioned adjusting the pace of purchases in view of incoming data on economic performance, employment and inflation.

The only thing that Mr. Bullard purposely refused to acknowledge yesterday was when the Fed might be tapering off its purchases. Bullard went on to say that like Japan, Europe risks an “extended period of low growth and deflation unless the ECB acts with an aggressive quantitative easing program.” To date, the ECB has been lending

The US dollar is firmer against most of the major currencies, but is more mixed against the emerging market currencies. Although the US reports April existing home sales (consensus +1.4%), the focus is on Bernanke's testimony and then the FOMC minutes.

Essentially, we expect the Federal Reserve Chairman to say essentially three things: First, that the Fed has made progress on its thinking of the QE exit strategy. Second, that there will be no imminent tapering off of purchases of long-term assets and that the decision is dependent on the trajectory of prices and the labor market. Third, that fiscal policy and weakness in Europe are headwinds for the US economy and that the Fed cannot yet be assured that economic growth is sustainable. We suspect some late dollar longs are vulnerable if Bernanke hits these points.

The Federal Reserve is not the only central bank in the news today.

The EUR/USD finished the day moderately higher, closing up 25 pips at $1.2905 ahead of what is sure to be a volatile session with Fed Chairman Bernanke set to testify in front of congress at 14:00GMT. Furthermore, we will also see the release of the most recent FOMC minutes at 18:00GMT.

According to Sean callow of Westpac,"The U.S. calendar is dominated by Fed chairman Bernanke's testimony on "The Economic Outlook" to the Joint Economic Committee of Congress (10am NY time). He will deliver a prepared text then take numerous questions from both friendly and hostile lawmakers. Volatility over the course of his appearance seems assured, as markets try to quickly decide whether Bernanke is trying to dampen talk of reducing QE some time soon, is affirming such a view or remaining non-committal. USD should gain in the latter two scenarios but we still expect the first outcome - Bernanke

The EUR/USD closed on Tuesday its second positive session in row after bottoming at 1.2800 on May 17th. The pair was fueled by the Fed's Dudley and Bullard's speeches and the lack of comments about the Fed tapering bond buying. The EUR/USD rallied from 1.2840 to be capped at 200 hours MA at 1.2935.

Currently, the EUR/USD is trading around 1.2905, still up 0.2% on the day. The short term perspective is slightly bullish in the 1-hour chart according to the FXstreet.com trend index. Indicators such as MACD, CCI and Momentum are pointing to the north while the Stochastic is neutral.

So, what's next? FXstreet.com analyst Valeria Bednarik says that "it's all about central banks," pointing that the BoJ's decision and the BoE and Fed minutes will focus the market attention in the short term. " Bednarik points in a recent report that "many of the voting

China is aiming to increase foreign trade by 8% in 2013 amid a slow recovery in the world economy and rising trade protectionism. The Yuan (CYB) has been steadily appreciating versus the dollar since last September and accounted for an all-time high of 0.63% of global payments, making it the thirteenth most-used currency in the world.

China and Japan began direct trading between the yuan and the yen (FXY) last June as a move to boost trade and investment between them. This was also viewed as a further step to enable the yuan to become a true global currency. Japan is China's fourth largest trading partner after the EU, the US and ASEAN. Bilateral trade volume settled directly reached ¥10 billion ($1.63 billion US) in 2012. The huge trade volume between Asia's two biggest economies is much more significant than any other agreements China has signed with

By Keith Weiner

Let’s take a look at a few graphs of the dollar, from Feb 1, 2013 through Friday May 17, 2013. Yes, I said graphs of the dollar. I’ve priced the dollar in gold first (of course), then silver, the euro, and even the yen. The pattern is obvious. The dollar is going up.

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I did not show copper, lumber, or wheat though they show the same trend. These commodities are not money, of course.

My point is simple. It’s not gold that is going anywhere. In past articles, I’ve used the analogy of measuring a steel ruler using rubber bands. Using the dollar to measure gold is like that. In this article I show that it’s not just gold, but silver, other currencies, and commodities. The dollar is rising no matter how we measure it.

The greenback rose compared to all of its 16 most-traded peers last week. A good gauge of its strength is seen in the Dollar Index, which rose to 84.25 at the end of last week, the highest since July 2012. The Dollar Index is used by the Intercontinental Exchange to track the greenback against its six main trading partners.

There are three main reasons for the continued strength of the US dollar:

Reason #1: Better Reported Figures

U.S. retail sales unexpectedly rose 0.1 percent in April, as US consumers spent more on cars, building materials and apparel. Economists surveyed by Bloomberg had expected a figure of 0.3 percent. Actual figures were much better, and also reversed a 0.5 percent drop in March.

The Thomson Reuters/University of Michigan preliminary index of U.S. consumer sentiment climbed to 83.7 in May from 76.4 in April, the highest since July 2007. The

The market yesterday was a write-off in terms of price action, as a few sovereign nations managed to squeeze in a national holiday in parts of Europe and in Canada. This week’s U.S. fundamental highlight will be delivered tomorrow – the FOMC Minutes from the May 1st meeting and Helicopter Ben’s testimony on the Economic Outlook and Monetary Policy before the Joint Economic Committee, in Washington. On the whole, market price actions over the past few-days indicate that a few investors are becoming a tad nervous ahead of Ben’s speech.

Some investors are anticipating that the release of Wednesday’s FOMC minutes will indicate that both the Fed’s "hawks and doves" are beginning to become “increasingly uncomfortable with the current $85-billion a month asset purchase pace.” The possibility of perhaps varying the monthly QE sizes may reduce the potential for an “outsized market reaction to any given adjustment.” Ideally, it seems

The US dollar remains largely in a consolidative phase, awaiting Federal Reserve Chairman Bernanke's testimony before the Joint Economic Committee of Congress tomorrow. There has been much talk about tapering asset purchases and Bernanke's views are critical.

However, comments by Japan's Amari, seemingly trying to soften yesterday's comments, after reportedly being criticized by cabinet colleagues helped lift the dollar back toward JPY103. Separately, soft UK inflation figures sent sterling back to the base it built last Friday and yesterday near $1.5165. Against the emerging market currencies, the greenback remains bid.

The BOJ's two-day meeting concludes tomorrow. No fresh initiatives are expected. The chief concern presently is the volatility of the government bond market - an unintended and seemingly unforeseen consequence of what it calls the qualitative and quantitative easing. The yield on the 10-year JGB rose 3 bp and continues to flirt with the 90 bp level. This compares with

The Japanese yen (FXY) surged across the board at the Asian market open on Sunday evening when Japan's economic minister Akira Amari stated "the yen's excessive strength has been largely corrected, and further weakness could be harmful." I expect this unwind of the yen currency crosses (yen strength) to continue for several weeks as Japanese housewives jettison their silver (SLV) and gold (GLD) positions to reclaim yen.

On the four-hour chart, the AUD/JPY currency pair is completing a textbook triangle correction after tumbling impulsively off its yearly high at 105.42. If the pattern pays off as I expect, the Australian dollar will rally in a leg E to around 101.60 before embarking on a third wave lower. I've applied Fibonacci targets to the chart to project possible targets and I expect we could hit the 127.2% level at 94.41 before the correction is over. A break of triangle support near

The EUR/USD was able to claw back a small portion of its losses suffered last week, finishing the day up 64 pips at $1.2884. Economic news was light on the session with European markets closed and no releases out of the U.S. Market participants will be expecting volatility to really pick up later in the week when we see Fed Chairman Bernanke's testimony to Congress, the release of the most recent FOMC minutes, and a number of other regional Fed speakers on the wires. Given the recent market buzz of the prospects of Fed tapering QE, the next few days could help set a more established trend for the pair as we near month end.

According to Marc Chandler, Head Currency Strategist at BBH,

in the U.S., the FOMC minutes from the April 30/May 1 meeting will be released on Wednesday. Markets will be parsing them very thoroughly for any

At some point, the Reserve Bank of Australia (RBA) will accept that if it really wants its currency to sell-off and stay down, it will have to be much more direct about its intentions. The tradition of talking down one's currency is now well-established from the Bank of Japan to the Swiss National Bank to the Bank of England and even the Federal Reserve. The European Central Bank would try to talk its currency down if it was not more fearful of a market overreaction tat prices in a collapse of the euro itself.

In Monday's minutes (Tuesday Australia time) of the May 7th policy meeting, the RBA provided no direct smoking gun to explain what I called at the time a mystifying rate cut. The minutes begin on a relatively optimistic note on expected economic growth rates:

Members noted that global economic data released over the past

Germany, the tightfisted task master, is encouraging Spain to draw down more than the 40 bln euros it already has of the 100 bln euro line secured from the ESM to recapitalize its banks. Spain's budget minister denies there is a need. Germany does not typically encourage countries to take on more debt needlessly. We suspect by late Q3 or early Q4, Spain will, however reluctantly, take Germany's advice as it will likely need more funds for its banks.

The continued decline in house prices, the contracting economy and high unemployment point to the likely increase in bad loans. While this may be generally appreciated, another problem is emanating from loans to households and businesses that have already been restructured.

The issue is that the loans have been restructured mostly because the borrower cannot service their debt. Banks seem to be hiding the full extent of the damage by classifying

The euro/USD (FXE) broke down from a month-long trading range and drifted lower last week. At the same time, European equities (and bonds) traded up and the Frankfurt DAX again closed at a record high. European economic news suggested weakness, including Q1 GDP contraction in France and minimal GDP growth in Germany. A soft euro had been a catalyst for weakness in global markets, but the divergence between the euro and European equities may suggest otherwise. This divergence seems to indicate that investors are expecting more action from the ECB, which would likely weaken the euro even more but benefit European stocks and bonds. In this article I will examine the recent trends in Europe and the implications for the euro.

Euro Diverging

The following chart compares the euro (represented by the FXE ETF) and the iShares MSCI EMU ETF (EZU), a proxy for European equities, since January 1, 2012.

A recent publication on hedge fund strategies posits on one hand that continuous monetary easing actions by central bankers will avoid any sharp market corrections through the remainder of 2013. On the other hand, the same publication does not anticipate "any big rotation from bonds into equities."

There will be no very dramatic recovery in the developed countries. In the U.S., for example, though PrevInvest - the market intelligence group offering this report - sees a recovery underway, it notes the movement is at a "gentle pace, far below that observed in previous recovery phases."

Some of the familiar fishing holes contain only tires and old boots and other visual clichés now, so hedge funds and seekers of yield generally, will have to go fishing in unaccustomed places

PrevInvest focuses too on the consequences of the race to the bottom among the world's industrialized nations, and the way this has

FX markets opened with a large pullback in the USDJPY, with some of the higher ups in the Japanese government beginning to taper expectations. Most notably, Japan's Economic Minister Akira Amari had this to say in a Bloomberg interview.

"It's being said excessive yen gains have been corrected a lot. If the yen extends losses a lot, people's lives will be negatively affected. It's our job to minimize that."

The corresponding price action:

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Any comments such of this have the potential to cause rallies in the JPY given the large leveraged position in JPY as indicated by the Commitment of Traders.

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There is another action packed week ahead, but first a recap from last week's FX Outlook.

Summary of Last Week's Action

FX markets kept to the script this past week, with EU continuing to contract and Japan continuing to receive positive feedback

Most of continental European markets are closed today for Whit Monday and Canadian markets are closed for Victoria Day. With important data and central bank officials speaking later this week, the market is content to keep most of the major currencies within the ranges seen before the weekend.

The yen is an exception. Comments by Economic Minister Amari that the correction to the yen's weakness is nearly complete, and additional yen weakness may be harmful, hit a thin pre-Asia market that saw the dollar spike lower to just below JPY102 before recovering. This was seen as first attempt by the Abe government to slow the yen's descent. The motivation does not come from abroad as much as Japanese officials trying to stabilize the bond market.

Officials have tried changing the tactics of their QE purchases, making more frequent though smaller transactions, as the dealers wanted, but this appeared to have

The most important force that has lifted the U.S. dollar across the board is the sense, encouraged by official comments, of the potential divergence in the trajectory of monetary policy between the U.S. and most of the other major high income countries.

In particular, the pendulum of market psychology has swung back toward speculation of tapering off of QE-related asset purchases by the Federal Reserve. At the same time, ECB officials continue to indicate they are carefully considering a negative deposit rate. Many still expect the Bank of England to resume its gilt purchases program and new initiatives on its forward guidance in Q3 after Carney takes the helm.

Meanwhile, Carney and the Bank of Canada continue to push further out when they anticipate full capacity will be reached and when it will remove some accommodation by increasing interest rates. The recent string of economic data, including prices, has been

It's time to put some ice on a hot investing topic. Some ice cube, that is. In his 1993 hip hop anthem, O'Shea Jackson, better known as Ice Cube, raps…

"You better check yo' self before you wreck yo' self. Cus' I'm bad for your health, I come real stealth."

And that's exactly the warning speculators in the new(ish) and wildly popular digital currency, Bitcoin, need to hear. Otherwise, they might find their dreams dashed - or worse, their portfolios "stealthily" ruined. Let me explain…

Desperate for An Alternative to the U.S. Dollar

Ever since the Federal Reserve embarked on its easy money campaign, everyone and their mother has been on a crusade for an alternative reserve currency. The battle cry? Stop devaluing our money! I hear you. But what are we going to do about it?

Several years ago, the euro was the top answer to the currency woes.