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FX Market Gives Up On NEW QE; Leaving Only US Equities 'Believing'

Tyler Durden's picture





 

Back in early May we noted that the 'strength' of EURUSD (at the time around 1.30) implied an expectation of a $700bn Fed NEW QE is on its way very soon - in fact, as recent developments by the two central banks have demonstrated, it was the ECB that added assets (and liabilities) over the past two months, even as the Fed has shed some excess weight. In those following six weeks, EURUSD has fallen nearly 1000pips in our favor as the FX market has finally given up hope of imminent printing (with only the most addicted of markets - US equities - left 'believing'). As Fed and ECB balance sheets have shifted in the last few weeks, so the new 'QE-less' target for EURUSD is around 1.1850 (200 pips lower), though we would suggest taking some healthy profits to leave a runner.

The ratio of the Fed and ECB balance sheets compared to the EURUSD exchange rate...

Chart: Bloomberg

 


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Tue, 07/24/2012 - 12:55 | Link to Comment The Monkey
The Monkey's picture

Crude oil and soft commodities are hanging right in there ad well.

Tue, 07/24/2012 - 13:03 | Link to Comment Precious
Precious's picture

The Fed / Bank pump-dump consortium is effectively out of gas.

Chart Porn: http://finviz.com/futures_charts.ashx?t=ES&p=w1

 

Tue, 07/24/2012 - 13:13 | Link to Comment idea_hamster
idea_hamster's picture

...and the cheese stands alone!

Tue, 07/24/2012 - 19:22 | Link to Comment AldousHuxley
AldousHuxley's picture

G rated

Tue, 07/24/2012 - 12:59 | Link to Comment john_connor
john_connor's picture

commodities not following the central planner play book today, specifically oil.  Ruh Roh

Tue, 07/24/2012 - 14:53 | Link to Comment Lohn Jocke
Lohn Jocke's picture

Sucks to be one of the goons who lept in on the Corn/Soybean market after that ship had already sailed...

Tue, 07/24/2012 - 13:02 | Link to Comment onelight
onelight's picture

Euro 1.1881 was the Summer 2010 low, btw (June I think)

Tue, 07/24/2012 - 13:16 | Link to Comment BlandJoe24
BlandJoe24's picture

Weird how oil isn't tanking with the equities drop/USD rise.  Seems to me it's "only" the threat of mid-east war that's keeping oil prices up, but that threat hasn't particularly escalated today.  Can oil prices resist the downward vaccum much longer?

Tue, 07/24/2012 - 13:59 | Link to Comment reload
reload's picture

I think so - for the very reason you mention. An eye watering price spike could happen without warning.

Tue, 07/24/2012 - 12:57 | Link to Comment bigdumbnugly
bigdumbnugly's picture

close your eyes, click your heels together and say:

 

there's no place like QEquities

there's no place like QEquities

 

Tue, 07/24/2012 - 12:57 | Link to Comment Precious
Precious's picture

Bernanke must shake his head every night before bed, thinking how stupid people are.

Tue, 07/24/2012 - 12:57 | Link to Comment Cursive
Cursive's picture

Wow, the catch-up snapback in the SPX is going to be crazy.

Tue, 07/24/2012 - 13:21 | Link to Comment RSloane
RSloane's picture

We're talking snapping a tight bra strap on a 44 DD.

Tue, 07/24/2012 - 14:55 | Link to Comment Lohn Jocke
Lohn Jocke's picture

...being worn by Michael Moore...

Tue, 07/24/2012 - 12:59 | Link to Comment BlandJoe24
BlandJoe24's picture

Azumi/Japan keep threatening to do something to stop "safe-haven" yen buying which is on a rampage.  Is there something they could effectively do?  What would that be?  What would global fx consequences be?

Tue, 07/24/2012 - 13:02 | Link to Comment gatorengineer
gatorengineer's picture

Allow unlimited immigration from Greece......

Tue, 07/24/2012 - 13:02 | Link to Comment Precious
Precious's picture

This is a lie.  There is no need.  Japanese manufacturers have essentially globalized and are practically immune to this issue.  The very high tech companies in Japan can live with higher export prices usually.  Japan is on an international asset buying spree.  Too bad they are not very good at it.

Tue, 07/24/2012 - 13:04 | Link to Comment SheepDog-One
SheepDog-One's picture

Godzilla.

Tue, 07/24/2012 - 12:59 | Link to Comment tbone654
tbone654's picture

The only reason the stock market is up, is there is no where else to put money...  period...  Money printing call option...

Tue, 07/24/2012 - 13:06 | Link to Comment Conman
Conman's picture

Holding cash at -3% is better than owning CMG and gettign your ass handed to you.

Tue, 07/24/2012 - 13:02 | Link to Comment Winston Churchill
Winston Churchill's picture

Run Muppets,run.

Tue, 07/24/2012 - 13:02 | Link to Comment Quinvarius
Quinvarius's picture

Well, I think Bernanke has deluded himself long enough about the banking system and economy surviving without QE.  It isn't gold.  It is just paper debt chits in a paper debt chit currency system.  This is just the way it works.

Tue, 07/24/2012 - 13:13 | Link to Comment engineertheeconomy
engineertheeconomy's picture

Bernanke is not the least bit delusional

 He knows exactly what he is doing

 He is printing himself Quintillions and Quintillions of dollars, our money, and he is getting away with it

Now who is stupid?

Tue, 07/24/2012 - 13:03 | Link to Comment Super Marco
Super Marco's picture

Shorts on shorts on shorts

Tue, 07/24/2012 - 13:12 | Link to Comment tmosley
tmosley's picture

Soon as they stop believing, Anti-Claus is comin' to town.

Tue, 07/24/2012 - 13:48 | Link to Comment Bohm Squad
Bohm Squad's picture

Do we really believe Ben will let the Euro win the race to the bottom?  Hmmm...I don't.  Combine this with a short-squeeze and the short-term forecast for the EURUSD certainly appears to have more upside than downside.

Tue, 07/24/2012 - 13:50 | Link to Comment Nobody For President
Nobody For President's picture

My sense of it, my gut level feeling, is that yesterday started the roll over and peel off to the dive, and We Are Going Down Baby.

Meanwhile, the Eurocrats are going on vacation. Perhaps many of them will just stay there.

Tue, 07/24/2012 - 15:15 | Link to Comment doc_in_the_house
doc_in_the_house's picture

To zerohedge:

please don't be a shoe shine boy...leave that to the cbs-mw "reporters"...= contrarian INDICATORS.

EUR @ 1.2058 = took all my 1.26-1.27 SHORT profts..still riding the 1.32 EUR shorts...will wait for a pop to around 1.22 to re-short !!= $$$$$$$$$$$$$$$$$$

Tue, 07/24/2012 - 17:59 | Link to Comment FearedDevil
FearedDevil's picture

actually the target is 1.1695 - but what follows that will not be expected by ZeroHedge.

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