Aussie Crossroad

$-yen unwinding hurting the high yielders? Does the Aussie move say anthing about gold?

Aussie Daily:
AUD%20Daily.png

Gold Daily:
Gold%20daily.png

Stop-loss Adjustment: Issue #45 Japanese yen

Stop-loss Adjustment Issue #45 – Japanese yen:

We recommend you move your stop-loss on any remaining positions to PT2:

Forex: 11690

Futures: 8590 (Dec) or 8678 (Mar)

Closed Trade: Issue #44 Swiss franc

Issue #44 Swiss (Closed):

Stopped out with profit on both lots at PT1 12890 spot (7760 Dec or 7831 Mar futures):

PIP profit (spot):

2-lots = 380 pips

Tick profit (futures):

2-lots = 210 ticks

* This profit summary is based on an initial two-lot position.

British pound daily: A rest?

Looking for a better risk/reward entry on the long side...

GBPUSD Daily:
121505%20gbp%20daily.pdf

Euro Wave Count Possibility

Facing multi-month trendline resistance...if the euro gets through, the target is 12400-level.

EURUSD Daily:
121505%20euro%20count.pdf

$-Swiss daily chart: 12760-level support

USDCHF Retrace and chart support near 1.2760:
121505%20chf%20daily.pdf

Swiss franc Issue #44: Stop-loss adjustment

We recommend you move your stop-loss on any remaining positions to PT1

Forex: 12890

Futures: 7760 (Dec ’05) or 7831 (Mar ’06)

Japanese yen Issue #45: Stop-loss adjustment

Both profit targets were achieved in spot yen per Issue #45 (we didn't quite get to PT2 on the futures side).

We recommend you move your stop-loss to at least PT1 on any remaining positions.

PT1 Achieved Issue #45 Japanese yen: Stop-loss adjustment

We achieved our first profit target in the yen today, per Issue #45.

We recommend you move your stop-loss on any remaining positions to B/E entry.

Issue #44 Stop-loss Adjustment

We recommend you make the following stop-loss adjustment on any remaining positions in Swiss franc per Issue #44:

Forex: Move stop-loss from B/E entry to 1.2975

Futures: Move stop-loss from B/E entry to 7711 (Dec ‘05); 7773 (Mar ’06)

Adjusted Profit Targets Currency Futures Issues #44 & #45

Adjusted profit targets Currency Futures

Mar '06/Japanese yen #45/ Swiss franc #44

PT1/ 8568/ 7821 (Achieved)
PT2/ 8678/ 7931 (Corrected & Adjusted)

A great piece highlighting faulty Fed policy

Prentation by Edward Chancelor, author of Devil Take the Hindmost to The Global Borrowers and Investors Ball, London 23 June 2005

An excellent presentation - I suggest you pay particular attention to the "Minsky Argument"

Conclusion:

"Federal Reserve pursuit of stability has left it ‘holding a tiger by the tail’

"It may end in either inflation or deflation volatility and risk spreads to widen

"At which point the new paradigm/Goldilocks economy will be consigned to history"

EdwardChancellorSpeech.ppt

Faber Comment: Fed can't tighten too much

"Tight money policies, which would depress asset prices such as stocks and home prices is simply not an option the Fed will consider."

Tidbit from Doom & Gloom Report 12 Dec '05:
121305%20Faber%20US%20Money%20Printing%20to%20Continue.doc

German Investor Confidence

German Investor Confidence Jumps Most in 12 Years (Update3)
Dec. 13 (Bloomberg) -- Investor confidence in Germany, Europe's biggest economy, rose the most in more than 12 years on signs the export-led expansion is accelerating.

Chart: DAX Stock Index vs EURUSD
Lower EURUSD = Higher German Stocks?
121305%20dax%20vs%20eur.pdf

Position Update

Positions:

We are still short ½ position in USDCHF; long Dec SF futures (1/2 position profit taken at PT1)

We are still short full position in USDJPY; long Dec JY futures

Swiss:

We recommend you maintain your stop-loss on any remaining positions (PT1 achieved) at your original b/e entry for now.

A key retracement level on the move lower in Swiss is just below our original entry. (see chart) 121305%20chf%20daily.pdf


Yen

We are not doubt doing some top picking in the yen. But we did get a primary trend break yesterday on a daily basis. Maintain the original stop-loss orders for now. (see chart)121305%20jpy%20daily.pdf

Needless to say, the focus today is on the Fed. More specifically, the Fed language i.e. Will they remove the “accommodative” word? If they do, we would expect more dollar weakness. But, we never really know. Stay tuned.

Language Change from the Fed? 12 of 22 say yes!

12 of the 22 primary dealers of U.S. government securities that say the central bank will stop saying interest rates provide ``accommodation,'' meaning they are low enough to spur economic growth. All 22 expect the Fed to lift its key rate to 4.25 percent from 4 percent.

Bloomberg News

China, Asia must cut dollar exposure - report

Monday December 12, 5:50 PM

China, Asia must cut dollar exposure - report

SINGAPORE, Dec 12 (Reuters) - China and other east Asian countries must together come up with a plan to slow the rate of accumulation of U.S. dollars and eventually cut their holdings, a leading Chinese government economist was quoted as saying on Monday.

Asian countries "don't need that large an amount of -- more than $2 trillion -- of foreign exchange reserves," Yu Yongding, the only non-ministerial representative on the People's Bank of China's monetary policy committee, told Market News International (MNI) in an interview.

China's reserves alone are likely to exceed $1 trillion leaving the country and its Asian neighbours dangerously exposed to a decline in the dollar, Yu told MNI last week.

China's foreign exchange reserves stood at $769 billion at the end of September, according to the latest official figures, swelling by $159.1 billion in the first nine months of 2005.

Yu said the country faced big losses on its reserves if the dollar does decline by as much as 30 percent as many U.S. economists predict.

"That is a very big problem and I think the Chinese government should take some action to reduce the growth rate of the accumulation of foreign exchange reserves as we're still facing the possibility of a big devaluation of the U.S. dollar, so capital loss will be huge," Yu said in the interview.

"If that happens, it will be a tremendous hit to the Chinese economy."

Swiss: USDCHF daily chart

121205%20CHF%20daily.pdf

'Dark matter' makes the US deficit disappear

Interesting piece in the FT December 8 2005 - If the current account is so "bad" why aren't we in a crisis already, the authors ask.

"In 2005 the US current account deficit is expected to top $700bn (£404bn). It comes after 27 years of unbroken deficits that have totalled more than $5,000bn, leading to concerns of an impending global crisis. Once the massive financing required to keep on paying for such a widening gap dries up, there will be an ugly adjustment in the world economy. The dollar will collapse, triggering a stampede away from US debt, interest rates will shoot up and a sharp global recession will ensue.

"But wait a minute. If this is such an open and shut case, why have markets not precipitated the crisis already?"

Full Story:
121105%20Dark%20matter%20-%20FT%20article.doc

Sell yen:Buy Nikkei - Is this trade "too" crowded?

"The trade of 'buying the Japanese equity market by borrowing the yen' has become too pervasive, too easy and may be overly exploited. The rise in the Nikkei has become parabolic and the drop in the yen has accelerated into a tailspin. These evelopments may be setting the stage for dramatic countertrend moves that could create a sharp squeeze for those who have large leveraged positions. This is a major risk today."

Bank Credit Analyst 9 Dec '05

Nikkei vs. USDJPY Daily Chart:
121105%20jp%20vs%20nk.pdf