AUTOREFRESH 
Blowing the froth off
The decline in EUR/USD today does little to change my fundamental view that what we are experiencing is a reflationary cycle as the deflationary forces of the European sovereign debt crisis have thus far not manifested themselves in a sustained way.
The market got particularly frothy yesterday after the WSJ reported the Fed was considering some modest further steps to ease quantitatively. The ISM indexes this week show the economy holding up better than feared and may delay or derail the move toward further extraordinary measures from the Fed.
The bulk of the gains in recent weeks have relatively little to do with the relative merits of the US or European economic recoveries and more to do with the fact that Europe survived what was a truly existential sovereign debt crisis. What we have is a reversion to the norm.
As long as we hold above the 1.3100 level, I expect the macro picture to remain unchanged: A world tentatively increasing its appetite to assume risk as investors veer away from the extreme pessimism of late spring.
playing a real tight short trade on e/j now, then buy the...
CNBC doesn’t seem to have the story yet….http://www.businessweek.com/news/2010-08-04/china-said-to-tell-banks-to-stress-test-for-60-home-price-drop.html
Hi Jamie Im not seeing the live quotes ,whats up? so at what level would you think I should cash in my eur/usd short ?
1.3100/10 is crucial to me, i suspect if we break we have some more downside, FWIW ..http://www.forexlive.com/high-risk-warning
Jamie, this post reminds me a the fair value post I think you made about 2 months ago.
http://www.forexlive.com/113268/all/if-1-151-25-is-traditionally-fair-value-for-the-euro
In it you say that markets tend to over shoot thus the plunge to 1.18xx and now in under a year, we find ourselves approaching 1.32xx.
Do you still think the 1.4xxx is still the destination before the market enters another 3 +months of range trading?
Had a cable short order kick in @ 1.5950 earlier whilst I was out.
Reckon it came pretty close at the high yesterday to that channel top I mentioned on Friday, so the plan is to stick with this play for a wee while.
More or less. somewhere between 1.35/1.40 is my guess…still the exact same view from 6 weeks ago…worked out so far. I’ll stick with it until it implodes.
This is FX…anything can happen
Jamie, your humor is wonderful and your crystal ball seems to have better clarity then us retail guys… speaking for myself of course, as I know there are many on this blog that are great FX traders. I only hope that I can acheive thier level someday.
Santander buys RBS branches, UK spin-off seen
http://uk.reuters.com/article/idUKTRE6730PM20100804
That’s that then.
Competition and transparency – the sweet oil of the open market. Stress-tests are just so fashionable these days. If you’re not running some, you are so out of date! Now we have governments competing for worst-case scenarios! Good news for financial stability in the long-term one would hope.
http://www.businessweek.com/news/2010-08-04/china-said-to-test-banks-for-60-home-price-drop.html
Nice catch Lilac. Ridin’ durrty
Ta Geetarman – didn’t do much really, except p’raps blow the froth off my coffee
Hey, if you can trade it without spilling the coffee all over yourself, you get my kudos
Me, I need my head checked out, I bought rubles recently… 
Maybe not such a good idea to lace it with the Stolly
Nasty!!!!
On a more sober note. I see a nice aud/jpy short coming up lets say in the next 4-8 hours.
Spasibo
Your welcome!
Hart… what do you have for a viable top side resistance for the aud/jpy? Jun’s high of 79.90?
A bit lower Eric 79.6- .8 but nice work on your part. After that it’s tricky as there isn’t much res/sup up to just under 78.8. And I emphasize just under 78.8.
Take a peak @ eur/aud folks. Is that ripe for a long or what?