Thursday, September 30, 2010
Competitive Currency Devaluation Trumps Sovereign Debt Risk
The possible implementation of the Fed's QE2.0 in November is trumping the continued stress in Ireland and Portugal as a driver in the foreign exchange market. The Euro has been the clear winner. Where is the Bank of Japan in all of this? The USD has retraced more than half of its move against the Yen. The BOJ better act soon or the Yen bulls will really gain confidence. I hope your happy Ben, your policies of benign neglect are slowly killing the USD. Look for continued weakness in the USD until the November elections.
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The US Dollar, $USD, is oversold at 78.78 on 9-29-2010 ... Should the Euro FXE, go down, then stocks will go down ... Better said, when the, EUR/JPY, that is the FXE:FXY, goes down, then the stocks will go down ... Volatility pick up.
ReplyDeleteBanks KBE have fallen below support of 23 ... And European Financials, EUFN, have fallen from support of 22.5 ... Stocks could fall lower 9-30-2010 or 10-1-2010.
I am bearish stocks due to regional news coming out of Europe, such as the ... EU Banking Sector Stability Report for September 2010 ... produced by the ECB relates funding difficulties for a number of European banks.
I am bullish gold ... As carry trade investment comes out of gold, it is likely to fall under $1,300 for a period of time, before it moves once again, substantially higher.
The Fed may announce QE 2 on November 3, 2010 ... If it does, it will be gold inflationary ...
I had been thinking it wise to go short the market, as the EUR/JPY, has reached full expansion, but after reading Tyler Durden's article ..... Why QE2 + QE Lite Mean The Fed Will Purchase Almost $3 Trillion In Treasurys And Set The Stage For The Monetary Endgame ..... I've concluded that further fiat asset expansion is possible if the Fed does come out with a surprise QE 2.
Yes, QE 2 may come November 3, 2010 .... The Federal Reserve may announce a plan to buy US Treasuries, it may simply print Dollars, yes simply print and print and print; and buy US Government Debt, to prevent a deflationary collapse.
This of course would send the value of the US Dollar, $USD, plummeting, and would be quite inflationary to many assets, such as food commodities, FUD, and especially gold, $GOLD. I think it wise to buy gold, specifically gold coins, at this time, even though a Surprise QE 2 is likely coming on November 3, 2010, which may create a demand for US Government bonds, SHY and IEF.
I agree with you, theyenguy. I also read that Zero Hedge post, and the $3 trillion figure is really scary. In this crisis we went from talking about billions to trillions thanks to all the problems with derivatives. As far a gold goes, people who know me always ask my why a currency guy like me is always talking about gold and silver. My response has always been, at my firm gold and silver are traded at the same trading desk as the currencies, hence they are money.
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