Originally Posted by
;
this is exactly what Vegas needed to say in one of the blogs about carry trading. The day it unwinds, it is going to be hell for a few and lots of cash for others.
Vegas:
EUR/JPY
This pair was in buy mode since May 17th, and there has been no push at or outside the initial fib
intense.
We exchanged once on the drop to the first fib, almost got stopped outside, then sold to the rally back for a
very small reduction.
But, storm warnings are brewing in this pair which makes it extremely dangerous to be long on fractures.
I told you before, major news releases all technicals, and on this subject we certainly have any major
news. For the first time I could recall in a cross, politicians are getting into action. Last week, all hell
broke loose when a Finance minister in Europe spoke about the EUR/JPY and also the demand for this particular
cross to stop appreciating because it was damaging European exports. He hinted it will be a topic for
discussion at the forthcoming G-7 summit in Singapore on September 15 -- 20th.
Now, the issue here is the fact the entire world is extended EUR/JPY, and for that issue brief the
Yen in most of the crosses. Yen was theâ€financing vehicle†for all the carry trades over the last couple
years. Past history indicates when this carry trade drops out of favor with the hedge fund community it
will be NASTY. I mean REAL NASTY. Account end nasty. Moves that make you believe your
machine is broken and can not possibly be appropriate. I'm speaking of anywhere from 500 to 2,000 pips at a
few days. Moves speculators are killed by that and make each politician joyful at the thought. The last
indicates this will be the result.
There are TRILLIONS of dollars worth of those trades on, and if this political talk which started last
week starts to gain traction along with other politico's in Japan and elsewhere, look out below. I can
guarantee you, right now, there are lots of hedge fund managers who are very worried about this pair
and their long positions. When [ not if ] these guys hit the exit button at the same time it can get REAL
interesting. Your stop, at a scenario like this, is moot. Having a long position, you could very
readily get filled 700 pips from the stop [ or worse ].
Let's be clear.
I really don't know when it will occur -- I only know it will happen. All the dominoes are being put up. The
politico's are beginning to send theâ€between the lines†message into the investment community. Right now,
everyone wants to play fine. But, the cannonball wasâ€shot across the bowâ€. It's only an issue of
time.
So, even though we do not have a reversal top above the fib intense, I'm shifting to sell mode in this
pair.
Everybody understands it is going to occur; I heard soros talk of it not long ago. This will be a memorable story that is going to be studied in universities accross the globe for a long time after conveys unwind.