This text is from blog famous currency strategist Joel Kruger .
TO QE OR NOT TO QE? – Ok..so everyone is now fixated on the Fed and whether or not we will in fact see the implementation of another round of monetary accommodation in the form of quantitative easing. But whatever you think might happen is not necessarily how things will play out. On the surface, it might seem that another round of QE would be US Dollar bearish and equity bullish. However, how much of these QE expectations have already been priced in? Furthermore, who is to say that another round of QE isn’t taken for what it really is….A message that the global economy is still in deep trouble. This would not exactly be equity bullish and could even translate into US Dollar buying despite any US Dollar devaluation effect from additional Fed money printing.
See daily forex technical video made by Joel Kruger :
IT’S NOT ALWAYS ABOUT YIELD DIFFERENTIALS – Again, it is true that the net effect of quantitative easing is currency bearish, but what happens when everyone is using quantitative easing as a monetary policy tool? This is the world we live in, and the reality is that any moves for additional QE from the Fed, will likely result in moves for additional QE from other central banks. Thus, the US Dollar negative impact of Fed QE is actually mitigated and even potentially offset on the expectation for additional QE by other major central banks. It is also worth remembering that currencies aren’t always driven by yield differentials. Even with spreads widening out of the USDs favor on additional QE, who is to say that flight to safety trade doesn’t come back with a vengeance? Who is to say that market participants don’t race back into US Dollars on fear of global instability? Finally, who is to say that the Fed in fact even goes through with another round of QE today?
TECHNICAL CLARITY – It is here where I always find comfort in deferring to the technical picture. Overall, while the EUR/USD and Currency/USD rally over the past several days has been impressive, the moves are still classified as corrective. and ultimately, it looks like we could soon see a lower top for currencies, in favor of some renewed broad based USD buying. While the Euro just may manage to extend back towards 1.3000, the psychological barrier offers formidable previous support turned resistance, and with daily studies already tracking in overbought territory, the rally looks like it is exhausted and poised for a meaningful bearish reversal. So irrespective of the outcome today, and whether we see QE or not, technical studies suggest that the markets will be looking to be buying US Dollars and selling global equities. Technical studies actually warn of some darker fundamentals ahead. I am already positioned accordingly and will look to increase my bets. Conclusion: BUY US Dollars and SELL everything else.
NorthStar Realty Finance Corp. (NYSE: NRF)
This is purely a technical play and fundamentals due not factor into the decision here. While medium-term techs point to additional strength back towards the $9 mark, short-term readings are warning of a move in the opposite direction and point to a pullback towards $5 before any consideration is to be given for a legitimate bullish resumption. Anyone who is currently long should consider booking some profits, while anyone who is thinking about getting long should probably wait.