Several factors: The fund long Fx positions are no longer heavily offside, therefore to get them completely liquidated (no longer long or even short) the Wizards will have to stay the course on moderating the heroin drip (monetary injections), raising rates on Feb 2 and again in mid March (no pause), and using more MoP "tough talk". MoP words will be less effective though once you get the hedge funds out of their anti-USD trade, although a lie or spin about the trade numbers on Wed the 12th may be such as opportunity. If it's a USD friendly number in the minds of the cognoscenti then that may be the USD rally top. If the Wizards of Oz stick with heroin withdrawal, then the stock market and bond market (because it's manipulated via heroin injections) will really accelerate from the current "correction" to a full scale rout.
On the otherhand if they relent on this heroin drip USD defense approach, and it turns out to be another in a long series of tawdry market manipulations (my suspicion for sure), then we will get a "cry wolf" effect from every trader in the world, and they will just pile right back into anti-USD trades with a vengeance, and this time we could see a real Dollar panic. So they are in a pickle now.
I'm sure they have also gotten the word from other economic blocs throughout the world too. One theory I have is that China may be about to do the long awaited currency adjustment, and the word has come down that they won't do it if the US is engaging in currency debasements, especially the full court press Y2K redux variety seen in October to early December. So the US may be trying to stabilize the USD to allow China to make their move (which in turn will be inflationary for the US). You may recall that on Dec 7th there was a big market drop from a $3 billion index future sale? At the same time countries all over the world were doing open air complaints about the USD. It was no longer the back channel stuff, it was public and critical. Finally even Easy Al had to make remarks.
So a quid pro quo arrangement has been patched together, but as investors and speculators we need to only focus on one aspect of it, is big time money printing, extreme negative real interest rates, and bogus Keynesian easy money economics involved, because that seems to be about the only playbook these morons have? In the case of the US that's all I'm focused on right now, the coupons passes, the debt monetizing, the corrupt inside loans via OMO operations and TIO. If it picks back up, and this can be tracked daily, I will have my answer, so I don't even have to have a bias (mine of course is they will revert back quickly to expediency, but I could be wrong, and actions will tell) about what I think they will do, or do what everybody else does which is listen to words and propaganda. I can just track their ACTIONS. I can also track the COTs for clues, and right now on the interest rate front you can see that the commercials are heavily long EDs and a fairly long bonds,
64.82.65.31
so they are clearly making the bet towards easy money and more bond market manipulation. Correspondingly they have very large bets on a down stock market on, so perhaps we are at a point in this drama where something (equities) needs to be sacrificed? Therefore one can suspect what is being set up here. |
