FX Trading - Dancing In The Dark

The market has regained some of its sanity since the last post, as precious (very, very precious at these prices) metals correct aggressively and EUR fell off a cliff. AUD is pulling back from it's huge sell-off, being the big benefactor of yield differentials, and GBP falls victim to dwindling expectations of a rate hike.

UK releases it inflation report later today, and in our view whatever it says should not be taken too seriously when trying to judge the possibility of rate changes. Fact is upcoming figures may change the scene drastically, even as officials seem reluctant to act on the rate front, quite convinced of inflation returning to target next year. Didn't Bernanke just say that recent inflationary pressures are only transitory?

Not much clarity at these levels, we may be seeing dollar correct its recent strength but a continuation is the preferred scenario, even as the US tries to convince China its holdings of US Treasuries are safe while at the same time trying to teach them how to run a country. Would you listen to someone on the verge of bankruptcy?

We're looking at USDJPY on a downward channel, rebounding after threatening a move to historical lows. Perhaps this is what an 'orderly' move looks like, which means the Japanese authorities may not be too alarmed; meaning a green light to sell the pair, barring a close above 81.00. Let the brave take the lead.

USDJPY - Is this orderly enough, Noda-san?

Peace.