hedgeman

Artificial U.S. Dollar Rally Is Coming to an End

We are witnessing a hystorical experiment. If it works Ben & co. will go in the history books as great thinkers, if it backfires it will be blamed on the "crisis" of whatever sort. There is no risk for policy makers and that's what will bite at the end.

It is easy to see a hidden subsidy to banks when FED purchases the Tbonds and Tnotes and banks realise great profits and hence improve their capital base. FED will buy the top (quantitative easing) and there is a direct cost of abt. 150 billion which will be banks "improved capital". TARP is a smokescreen, the bigger transfers take place between the FED and its owners.

After FED buys long end from the banks then it will be time for some 10-30 steepeners as a strategic longer term view based on simple fundamental reasoning.

Dollar Shows Resilience As Safe-Haven Currency

Just buy JPY ag EUR and USD. USDJPY manipulation is key to USD correction. It is still just a correction within a bear trend with a target of 65.xx for DX...

Disclosure: Short EURJPY and USDJPY.

Forex Wrapup: Dollar Benefits As Traders Focus on Weak Economies Elsewhere

We have to diferentiate between "focus" and forced liquidation of positions due to eroding capital. Next to move? Should be EURJPY.

EURJPY is standing on critical support levels, bellow 162.00 it will start to brake USDJPY advance and should provide a temporary relief for the USD bears. Since EURJPY was a long commodity proxy for the past few years it should revisit sub 150 in the first round. Since EURJPY is in a distribution phase for weeks now this commodity corelation seems to be broken however it will return. The move will most probably be very fast after 162 gives way on daily closing basis. This very popular carry trade is the last to brake and since capital is severely depleted by fast moves on other fronts the liquidity will be very poor and will exacerbate the move. If USDJPY brakes above 110.80 on daily closing basis the downmove of EURJPY could stall (for a short while only). Levels to watch are 165.10, 164.45 and 162.00-50 area (here defense is expected).

Long commodity, short equity, short USD and carry trades strategies unwounding on an overcrowded illiquid summer market. Fundamentals have limited impact at present.