Archived IMT (2010.10.29)

MARKETS HAD BEEN QUICK TO JUSTIFIY every twist and turn in the USD in terms of QE. A few pips gains in USD causes traders, analysts and reporters to attribute the move to QE2 being priced in the market and/or the Fed will start on the lower end of expectations (not more than $200 bln in initial purchases and less than $700 bln in overall purchase). On the other hand, USD weakness is explained by the notion that QE2 is here to stay and becomes the new for an extended period of time. Although USD 10 year yields closed the week above their 55-day MA of 2.58% (closed at 2.61%), and GBPUSD closed NY above $1.60 for the 1st time since late January, Im not sure if these figures are significant enough to be defined as a key break. Ive already identified false breaks in EURUSD 2 weeks ago when it closed below $1.40 on Oct 15. Ill cover the meaning of rising bond yields related to the Fed's ability to create inflation in the upcoming note.