Forex

Hello All,

there has been a great technical break beyond the 117.00 level, and there is strong indication that carry trades are resuming in full strength.

go long on the USD/JPY, that would be my best advise

The strong selling of USD was boosted yesterday after hopes that a possible rescue plan for ‘Ambac Financial Group’, the second largest U.S. bond insurer, would help limit the damage from the ongoing credit crisis. Also yesterday, the US Existing Home Sales for January fell to the lowest level in 9 years while prices slid for the 7th consecutive month, posing a threat to consumer spending; the largest part of the enormous US economy. By the end of the day, the USD remained range bound vs. the EUR, while appreciating the most against its’ high-yielding counterparts, most notably the JPY. Economic data from the US now shows the effects of the worst housing recession in 25 years have spread into other areas of the economy. The Fed Bank of Philadelphia’s general economic index fell this month to -24, the weakest reading in 7 years. With other major sectors such as Employment, the financial markets and business investment; the Fed now has more than just the housing market to contend with when making its monetary policy decision. Currently, the market is pricing at a 65% chance that the Fed will lower its Interest Rate by another 0.25%. Today, traders may expect to see an overall increase in volatility as the US economic calendar filled with eventful releases like the PPI, National Home Price Index as well as the Consumer Confidence data, later in the afternoon. We expect the USD to rally on the back of stronger inflation numbers but weaker consumer confidence could cap the currency’s rise.

I know it's not cool to play Monday night quarterback but the yen's strength is not getting weaker in the short term. News out there are all negative, $10 billion write down for Citi, inflation is up, and Fed is going to cut the rates again? Helping who? The economy is in such a deep shape and it's even going to get worse.

However, every story has 2 sides, the good and bad. The bad I have mentioned and I believe many of you agree. The good side is that this correction is necessary to ensure a stronger economy in the long run. During tough time, hang on to your money, don't spend anything that are not necessary.