JPY

I have all but been assured that China (SAFE) does not employ leveraged strategies. That was my first suspicion as well. It makes sense not to as well.

I don't antipate EUR/USD to get back above 1.30 for anything longer than a cup of coffee, but I am waiting and watching as the uncertainty during these times is hard and technicals are making me lean towards further downside in EUR as it appears we are at a near term top (from off the 1.26 recent lows). I will be patient and let things play out as my timing has been a bit off recently.

These institutions are receiving more inflows from investors who have decided to seek out investment vehicles that are income generating (coupon payments, dividends) and a come with a guaranteed return of capital (think fixed annuities). Capital appreciation vehicles are not in demand in a deflationary environment coupled with the psychological trauma inflicted upon investors from the crisis. Consequently pension funds and insurance companies must redeploy these increasing flows into yield bearing assets.

Export driven sovereigns then attempt to redirect these flows into USD and EUR as those are the two deficit regions (Eurozone excluding Germany, that is). UST and US equities will be the destination for these purchased USD. Euro zone bonds will have a bid as well from these sovereigns in order to essentially fund their customer base. No one wants to assume someone else's trade deficit so all is being done to prop up the export customers ability for consumption. EUR will fail once concerns are revisited, as they are manifesting at this moment. The ECB extension of the full allocation repos into 2011 are not due to US double dip concerns, rather capital funding concerns for Greece, Ireland, and Spain. The austerity measures in these nations will result into the respective citizens resorting to not only reduced savings, but a depletion of existing savings, i.e. a depletion of these banks' deposit based capital. Any additional crises will inspire a run on these banks as a result as the citizens are not generating the income and cash flow to cope with their austerity.

Aside from momentum traders and repatriation flows, JPY has been strengthening due to China's diversification away from USD and UST partially driven by trade weighted rebalancing as the Yuan trade push gains more steam especially amongst ASEAN nations. China buys JPY and has already been publicly reported to add to its JGB holdings. Japan must in response buy USD and UST in order to stave off additional currency appreciation and maintain the cost competitiveness of its exports. Other ASEAN recipients of China's redirected capital outflows must do the same as well. If they do not, then they will have to absorb the U.S.'s trade deficit with China as a result (capital account decreases are met with current account increases for the U.S.). U.S. investors are overwhelmining these redirected inflows by selling USD to go into higher yielding assets.

nikkei225 ris at lowest 24/24
bounced back from its 200MA
i still expect upmove.

NIKKIE TESTING ITS 100MA going for testing 200MA