Archived IMT (2009.05.28)

Weekly Jobless claims drop to 623K from 636K, while durables rose by a stronger than expected 1.9%. Both figures are good for the economy but add negativity to bonds, further spiking the rally in bond yields. We cannot imagine the Fed sticking with its current plan to purchase $300 bln in treasuries when their yields are exasperating the fragile jobless recovery and further endangering the value of their foreign holders. The only solution so far is for the FOMC to step up purchases, the implications of which will flash the green-light for dollar selling. The long term hedge strategy of shorting AUDNZD backing our long AUDUSD is in the green on both sides of the trade as AUDNZD extends damage to 400 pips off its 1.29 high after its triple top failure, while AUDUSD maintains its upward run. Note the AUDUSD remains in its 2-month channel, with support at 0.7560 and medium target at 0.8180.