Tuesday, February 26, 2013

Some of the Turmoil in Currencies Explained

Although I love how the MSM tries to attribute every market move to some event- I guess saying that sellers outnumbered buyers when prices go down and buyers outnumbered sellers when prices go up is just too bland- I saw a number of stories with the same flavor of the Bloomberg report below. The article attempts to explain the volatile moves in the currencies markets yesterday, which I believe were the focal point of all other moves in other markets, be it gold, equities, etc.

As Bloomberg reports.... 
The euro rose, climbing from a seven-week low against the dollar, after Italian and Spanish bonds trimmed losses on waning concern that inconclusive Italian elections will deepen Europe’s debt crisis.

The common currency strengthened versus 12 of its 16 major counterparts amid speculation its 1 percent slide against the dollar yesterday was excessive. The yen weakened on speculation Japan’s Prime Minister Shinzo Abe will select Haruhiko Kuroda, an opponent of deflation, as the next central bank governor, paving the way for the currency to extend this year’s decline.

“The euro is going to be volatile and jittery,” said Peter Rosenstreich, chief currency analyst at Swissquote Bank SA in Geneva. “The market is digesting the political situation in Italy and its potential longer-term ramification.”

There are literally hundreds of ways you can look at the machinations in the currencies markets. One way I look at it is through the  Powershares US Dollar Bull Index ETF (ticker UUP).


The UUP is trading up into a major resistance level, on heavy volume. We will have to see if it is enough to get it up and over. That said, the QE ball, if you will, seems more squarely in the Japanese or European court versus the Federal Reserve, which may put a bid under the dollar.

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