EURYEN- the cross rate is a harbinger of deleveraging process

The EURYEN (Euro vs Japanese Yen)
is a quasi index where we stand at the deleveraging process, that refers to the trades which were set up against borrowed money. Banks and Hedge Funds did that with unprecedented sums of money. Big redemptions from Hedge Funds force an indiscriminating liquidation of trades and forced buying of YEN to close positions. As the chart shows, that happens in panic. We are now at a support around 124/5 but might have to extend short-term to 1.20 near-term. Thereafter, we will see a sharp correction up to 1.35/40 area in November, as we are so steep below monthly Bollingers that also here a snap back rally is due. That will be also the time stocks will have a sharp relief rally very likely. The problem is that the losses of Hedge Funds are even rising and by the end of December, the redemption wave might increase even more. We will discuss that as we see more evidence going forward.


~ by behindthematrix on October 23, 2008.

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