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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 | 2645970 The Monkey
The Monkey's picture

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

Tue, 07/24/2012 - 13:03 | 2645985 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 | 2646059 idea_hamster
idea_hamster's picture

...and the cheese stands alone!

Tue, 07/24/2012 - 19:22 | 2647463 AldousHuxley
AldousHuxley's picture

G rated

Tue, 07/24/2012 - 12:59 | 2645996 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 | 2646459 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 | 2646007 onelight
onelight's picture

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

Tue, 07/24/2012 - 13:16 | 2646053 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 | 2646237 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 | 2645972 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 | 2645973 Precious
Precious's picture

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

Tue, 07/24/2012 - 12:57 | 2645986 Cursive
Cursive's picture

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

Tue, 07/24/2012 - 13:21 | 2646072 RSloane
RSloane's picture

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

Tue, 07/24/2012 - 14:55 | 2646467 Lohn Jocke
Lohn Jocke's picture

...being worn by Michael Moore...

Tue, 07/24/2012 - 12:59 | 2645998 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 | 2646008 gatorengineer
gatorengineer's picture

Allow unlimited immigration from Greece......

Tue, 07/24/2012 - 13:02 | 2646009 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 | 2646017 SheepDog-One
SheepDog-One's picture

Godzilla.

Tue, 07/24/2012 - 12:59 | 2645999 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 | 2646021 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 | 2646010 Winston Churchill
Winston Churchill's picture

Run Muppets,run.

Tue, 07/24/2012 - 13:02 | 2646013 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 | 2646060 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 | 2646014 Super Marco
Super Marco's picture

Shorts on shorts on shorts

Tue, 07/24/2012 - 13:12 | 2646054 tmosley
tmosley's picture

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

Tue, 07/24/2012 - 13:48 | 2646200 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 | 2646204 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 | 2646546 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 | 2647292 FearedDevil
FearedDevil's picture

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

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