A little late in the day for me to recommend anything but hopefully you took my advice last night and bought the yen. I am tempted to say stay in over the weekend or sell USD/JPY now but we don’t want the market to open on Sunday and see the USD/JPY rally but not be able to do anything about it until 5 pm. That would make us look foolish and add insult to injury. The more prudent approach would be to wait until 5 pm Sunday (or 6 depending on your dealer) and then reenter your positions. If you only pay a 1 pip spread like me it’s not a big deal and you will at least be able to get out of the market it when you want too. Like I said yesterday, I see the USD/JPY headed to 101.50 and probably beyond and I see GBP/JPY headed to 200.

Some of the senators yesterday questioned Bernake on why mortgage rates did not decrease even though the fed cut rates. What they don’t seem to realize is the Federal Reserves rate cuts were never aimed at lowering rates for personal loans like mortgages. It is all about making it cheaper for desperate banks to borrow money more cheaply from the Fed’s discount window.  If not for the liquidity being provided by the central banks and investment from sovereign wealth funds in all likelihood many major banks would be out of business today.  So to recover losses they have kept rates higher or actually jacked them up while they borrow money from the Fed at much lower rates than they are charging. The banks deserved what they had coming, no one should be bailing them out. That is like rewarding a child that has been naughty. As the old saying goes spare the rod and spoil the child. Now those banks who survive will be less inclined to scrutinize their loans and other business deals since they know that the Fed will bail them out if they start taking on water. Meanwhile the little guy takes it right in the rear as inflation spirals out of control and more of their wealth is eroded more quickly than usual. I thought Bernake stuttered a lot but when I saw Paulson speak last night all of a sudden Bernake seemed like the smoothest talker in Washington. Where did they find this guy? You would think he was the lowliest street urchin they could find but in fact was the former head of Goldman Sachs. It probably helps that Goldman is one of the top contributors to all but Ron Paul’s presidential campaigns. Kind of funny how all three of his predecessors ended up in government too, no wonder Goldman is the golden boy of banking, is the largest in it’s field and is never in trouble. This must be what gives them the right to pretend they did not take losses in the sub prime crisis and cook their books. In any case his comments did not help out the case for the dollar with his talk of globalization (code for wealth redistribution ala communism) and this coupled with good data from Japan conspired to sink the dollar and bolter the yen considerably last night and today. Just hearing the man speak and stutter while answering scripted questions which were right in front of him on the podium made me want to sell the dollar. Well, so much for the strong dollar policy. Carry traders are living in fear after the jobless rate fell to 3.8% year on year and household spending soared. This is all very bullish and I see USD/JPY going to 101.50 and GBP/JPY going to 200 in the near future. Meanwhile German retail sales beat expectations and helped lift the euro and Swiss franc to new all time highs. US core PCE (the Fed’s favorite measure of inflation) was higher than economists forecast but don’t expect the bankers at the Fed to do anything about it. Not while the private banks they represent are near collapse. I don’t see any reason for the dollar to rally next week.        

The yen did wait until Bernake spoke to crack 1.0572 and if Japanese CPI comes out higher than expected tonight should stay below it. The next target is 105 and it is ultimately headed for a rendezvous with 101.64

Bernake looked like a deer in the headlights at times today, and was stuttering when tough questions were asked. A lot of what I have written about in recent months was discussed today during the hearings in the senate. Namely that oil could soon be priced in other currencies and that there is an obvious correlation between the weak dollar and high commodity prices. Also that inflation will not be tamed by the fed raising rates again after the fact in a knee jerk reaction. The interrogators ( as I like to think of them since the Federal Reserve in my mind is a criminal enterprise) also asked about the sovereign wealth funds bailing out the big banks and their influence. He did admit that banks will fail because of this latest fed inspired fiasco. What I also saw pointed out was that foreign investors were starting to shy away from U.S. assets as I have discussed in my prior posts regarding the TICS data. Bernake claimed that investors still had a healthy appetite for U.S. treasuries but he must not be looking at the same data I and the senators are. What the data shows me is that the lower yields on treasuries coupled with the depreciating dollar make the treasuries less and less appealing every day. Meanwhile with more and more people realizing many corporate binds are simply junk with AA ratings slapped on them and that major bond insurers are near collapse corporate paper is not the answer either. Real estate is hardly the solution and the stock market is contracting, so I ask you where exactly are these foreigners supposed to invest in America? Seems like the net inflows will soon be drying up aside from those from foreign exchange reserve managers who are already leery to buy more dollars.  If all the private investors  pull out they will probably just throw in the towel and switch to buying euros. God forbid they get angry or scared and try to dump these dollars as the greenback performs it’s tailspin. If that happened the dollar could be trading at parity with the Mexican Peso overnight. Like I said yesterday wait for Bernake to speak and then sell the dollar, since he wants to devalue it anyways and knows what to say to make it happen it works like a charm. German employment data coming out strong while U.S. employment info coming out weak helped also. Not to mention that there was no upward revision to U.S. GDP.

Now is no time to be getting greedy, wait until the New York session to add fresh dollar shorts. The record oil prices tend to make the Canadian dollar a favorite but I prefer the better economic conditions and monetary policy stance found it Australia.

The dollar did indeed continue to weaken today on the back of more lousy U.S. data and new record high oil prices.  Both U.S. Durable goods and New Home Sales were far worse than expected  and  mortgage applications fell a huge amount once again. mass layoffs also increased substantially in January and are expected to continue to increase. Kohn’s remarks yesterday did nothing to support the dollar and neither did Alan Greenspan’s made in Dubai. The architect of the current financial crisis continues to effect the dollar and stock market with his rhetoric about embracing foreign sovereign wealth funds and their private agents as America’s saviors and the benefits of globalization.  He  also harped on the terrible states of affairs in the U.S. economy stating that he sees the U.S. economy shrinking in 2008. Today chairman Bernake’s opening statement was also pessimistic and says that risks are still weighted to the downside. Fed speak that they are going to continue cutting interest rates. He also made the case that inflation would moderate even as rates are slashed and the dollar crashes which indicates his predilection to cut rates. Bernake termed the securitized mortgage market as dysfunctional while taking questions from Barney Frank. Bernake also explained in a round about fashion that the rate cuts were never about helping the average person with a mortgage, it was always about lowering the borrowing costs for cash poor banks at the Fed’s discount window. The banks profitability can now be bolstered as they borrow at 3% (soon to lessen) and make loans at over 6%.  Tomorrow Bernake will be testifying again front of a different committee in the house of representatives so don’t expect the dollar to do well then either.

The dollar took a drubbing today, and is currently licking it’s wounds. It is your choice if you want to enter a short while it bounces or actually buy it and try to profit on the bounce. AUD/USD looks destined to test $.94 so buying on any pullbacks up to that level is a good idea.

Ding dong the dollars dead. Where is the amero when you need it? That is what the American populace will soon be asking as the dollar continues to plunge. The powers that be are going to use this weak dollar to launch the new currency and this will be the next step towards the North American Union. They will point to the euro’s strength and say see this is why we should create the amero. The Canadian dollar once again led the way and properly predicted the U.S. dollar’s future direction yesterday. Although it did bounce a little bit when it hit that Fibo I mentioned in yesterday’s trading advice and made a feeble attempt at parity it ended up falling like a stone later. Today the dollar was battered against the other currencies with weak consumer confidence hurting it. The consumption based economy is a economic model which is doomed to fail ultimately, you cannot continue to consume and not produce anything, eventually it will catch up to you. The high PPI did not strengthen the dollar, it just made things worse because people know the Fed will not raise rates and that inflation is out of control. So it makes America and the dollar an even less attractive investment, much like third world countries with soaring inflation. No one wants to invest there because they know that their percentage gain cannot keep up with inflation and the rate of exchange will continue to worsen. The only thing making the U.S. different right now is the intervention by Asia and even they are starting to see the writing on the wall. Bottom line is, if the dollar did not rally by now it is not going too.

Today’s Existing Home Sales shocked the market by coming in just slightly below last month’s total.  This could be construed to be a sign of some stability returning to the market. Or at least enough bargain hunting as desperate people are dumping at or below cost to maintain good volume. Indeed the average sale price did drop over 3% from last month and I know people in Florida who are taking a bath on real estate who are happily taking $100,000 hits on properties just to be rid of them. With the increased cost of homeowners insurance, higher property taxes due to inflated home prices, and rates rising on the interest only and no money down mortgages these speculators bought with in the hopes of quickly “flipping” these homes it’s no wonder.  True be told I do not feel the least bit sorry for these greedy people who thought it would be strawberry fields forever. They drove up the price or residential real estate to the point where home ownership is impossible for most working class families and are now paying for their sins. It is one thing to inflate a stock price to a ridiculously high level since no one is being forced to buy that stock at outrageous prices but quite another to drive up rents and home prices,  which forces people to move away or leaves them broke. In South Florida the average wage is not enough to pay for a $300,000 ranch home so people are either leaving the area or up to eyeballs in debt trying to make ends meet. Either way it is not good for the economy and I for one am glad to see balance restored and the pigs get slaughtered. Naturally I was not speculating in real estate as I expected this catastrophe in advance, as anyone with some idea of how economics and floating interest rates loans work did. Of course when people are in the middle of a bubble logic and reason are overwhelmed by greed and euphoria. Looking ahead the calendar is interesting with inflation expectations out of New Zealand tonight at 9 pm and GDP out of Germany tomorrow at 2 am. Followed by German IFO at 4 am and then UK CBI industrial trends at 7. Top all this off with U.S. PPI at 8:30 and the Housing Price index at 10 am as well as the Richmond Fed Index and it is easy to see why the market is basically holding it’s breath today waiting for tomorrow. Thaw only pair to make significant moves today was USD/CAD which has just bounced off of Fibonacci support at $.9963. This also completes a chart pattern and I expect this level to hold going into tomorrow.

This Morning USD/CAD has fallen quite a bit and is just now bouncing of of Fibonacci support at $.9963. Now is a good time to buy this pair, I am long with a target of $1 and my stop at $.9960