Minute Men

Investors are on edge, waiting for insight from the Fed’s July meeting regarding the upcoming taper.

The dollar has seemingly bottomed…

A close-up:

And, the USDJPY has broken out of its falling purple channel and should retest the white channel this morning.

I’m looking for yesterday’s target to be hit prior to a reversal.  Shorting on the opening and looking for 1648-1650ish.

UPDATE:  9:33 AM

That should do it for the downside — a little past the .886 and tagging the grey midline.  Going long here at 1647, stops at 1646.

As we discussed yesterday afternoon, a strong reversal here could set up a nice IH&S Pattern (red) targeting 1670-1672.

But, it will all come down to the July Fed minutes, due out at 1:00 PM.

Treasuries are doing their part, backing off the 3.00% mark — albeit due to OMO.

Is it engineered?  Of course.

Will it work?  Probably.

Will it blow up some day?  Undoubtedly.

But, for now, the markets are willing to ignore who’s doing the buying as long as someone is buying.  We’ve seen this over and over again with the countless interventions.

Call it PPT, call it TPTB, it doesn’t much matter.  The banks have hundreds of trillions in interest rate swaps that could sink them in a heartbeat if: (1) interest rates were to soar, and (2) they were ever required to mark their contracts to market.

The Fed, with the budget to monetize virtually all Tsy issues (and enough of the open market sales), knows this and is buying time — hoping the worst offenders can get their houses in order before things get out of hand.

As long as they have the ability to keep things from getting out of hand, they will.  And, as long as the MSM plays along, they probably can.  Markets are like elections.  The hard core bulls and bears are unlikely to ever change.  It’s the undecided folks in the middle who decide the winners and losers.

When an avalanche of sell orders floods the market, we get crashes — uncontrolled events like May 2008 and August 2011.  We’ll know one’s happening when volume spikes, channels fail, patterns bust and prior lows don’t hold.

Most of the time, however, we get mild corrections that satisfy the bears and don’t freak out the bulls.  To a chartist, they appear as channels being fleshed out. That’s what we’re facing now, though careless wording in the Fed minutes could easily change things.

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