Unusual FX Action?

Hi Spec / FXHandler: Theres a really interesting interview with Marc Faber on Bloomberg from friday where he talks about the Dollar and the stock market rally.


S

fxhandler, eating food can also make u fat (depending on how much excess quantity is consumed) the money printing is very insiginifcant compared to monetary losses the system has encountered. Believing stocks rallied purely due to inflationary expectations is silly. There are quite a few reasons why they rallied so fast.

money printing will not go on forever in US and compared to UK QE is not that big infact smaller on a dollar basis relative to GDP. IF QE ends by fed this fall then stocks will have to find other reasons to rally which will be hard in current circumstances. Deflationary data will also impact stocks to the downside when QE ends.

As a contrarian, dollar bearishness is at extreme levels and which normally results in a turning point. It is no good extrapolating trends and believing they will go in one direction indefinitely.

There is data that appears to conclude that big investors are invested whilst retail investors are now starting to come in as they missed the rally. This can be seen as a short term top in the market and a possible turning point. Volume has also been lighter than normal.

ashraf, do u believe the USD is becoming the prime carry trade which is explaining recent weakness? If so, it may be on a downwards path but pros say its hard to get data on carry trade activity and link it directly to weakness.

Its amazing how overbought the stock markets are in UK/US but still climbing. But the carry trade can still work if the interest rate differentials exists despite stocks. So if stocks fall, dollar can still fall due to dollar carry trade? This may explain some of unusual movements in the market

personnally I think sterling will become the next carry currency when interest rates fall with plenty of liquidity in UK - Do not underestimate this possibility. For the meantime dollar is possibly being used as the carry.

Ashraf,
thanks.another point is ,when I am looking at DJIA(spot) chart its appear that 9700-9730 will act as good resistance for the market.Will it be too riskier if i short DJIA fut at current level?
regards,
Rajib.