As last couple weeks, last one was very interesting. First here you are some

I. Important news from the week:

1. We have first non-sub-prime mortgage firm/institution filed for bankruptcy. The toxic problem is spreading indeed.

2. China is threatening with the
"nuclear" option - selling the US government bonds - I do not think they will do it, but if US government make restrictions to a nation which live to export 70% of its goods to US - what choice Chinese will have?

3. FED decided to keep rates unchanged. Some people believed FED will raise them, some commented they will lower the rates. I am amazed how educated people can think that? If FED cut rates, it will collapse the dollar, if they increase rates, the stock market will collapse. Bernanke playing very balanced, and actually he doing very good job keeping US economy at the edge. However, soon or later FED needs to choose between dollar and the market. Hopefully for currency speculators like me this will be not that soon (Analysts suggest October/November.2007).

4. Wing commander Bernanke preparing to "invest" 35 billion dollars in sub-prime mess. Where they will come from? Printing presses, because I do not think US government will raise taxes before elections.

As "free" media say, they no longer do helicopter drops. They use B52 aircraft instead. Who knows may be we need to invest in aircraft-industry :-)

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II. The wedge in USD index:


For first-time readers (like Vasil), and those who do not know, the wedges are reversal patterns. This wedge is bullish for USD index, no matter what people say for US economy, debt bubble etc. I am sure that at the end of the year, the USD will be lower, but wedge suggest we will have one bounce before that.

All here is "normal" and proceeding as it must be. The double bottom has forming, is almost confirmed. The target is up - level of 82.

Then we will see, may be the wedge will be broken, or may be we will have one more turn down, then up. However since this is short-term speculative analysis, we will not cover this. I will only say, that if wedge is broken, we will see USD index 86-88-90.

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III. Wedge in EUR/USD:

EUR/USD 4 days chart:

This chart is like weekly chart, but more compact. Because USD index is actually dominated by EUR, EUR/USD looks like mirror chart. We have almost same wedge, but this time is bearish for the EUR (lower EUR - higher USD). The target price (assuming the wedge will not be broken this time) is about 1.34.50 or little bit less.

EUR/USD 8 hours chart:

Here we can see two double tops - small one - orange, and big one - yellow. Every top, is lower than the previous one (lower highs) - once again a signal that EUR will drop.

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IV. Summary:

EUR - down, USD - up, but don't get overexcited, situation is special, just see the crazy news at the beginning :-)

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V. Carry trade using AUD/JPY [new]:

AUD/JPY 1 day chart.



Wedge is broken. There are some support ~ 100. Stay aside for now, until Japanese government do not cut rates or do something else to kill their own currency.