- Forex Commentary -

September 13, 2010 (FinancialWire) (Investrend Information Syndicate) (Via Brewer Investment Group) (Overnight, September 10, 2010, Report) (Go to http://www.financialwire.net/2010/09/13/futures-15/ for today’s Futures commentary.) — For our readers with an interest in currency related equities such as the PowerShares DB US Dollar Index Bullish Fund (NYSE: UUP) and the PowerShares DB US Dollar Index Bearish Fund (NYSE: UDN), FinancialWire(tm) contributor Brewer Investment Group provides us with some related perspective and insight regarding those markets:

The USD JPY closed up on Friday, but was still lower for the week. Today’s action confirmed Wednesday’s closing price reversal bottom, but all this indicates is the possibility of a short-covering rally back to 84.62 to 84.93. What I really wanted to see was a close over last week’s settlement at 84.28.

This morning, the Dollar/Yen regained 84.28 for a short-period of time, trading up to 84.37 before buying dried up. This indicates that the rally was most likely short-covering rather than fresh longs because of the way the market drifted lower throughout the rest of the day and into the close.

Stronger demand for higher risk assets as well as the threat of an intervention by the Japanese government and the Bank of Japan was the catalyst behind this week’s bottoming action.

The daily reversal bottom pattern usually lasts 2 to 3 days and ends inside of a short-term retracement zone, but they have been known to start even larger rallies. This is possible with the current set-up. Money has been shifting out of Gold and T-Bonds and big investors may be gearing up to invest these funds in the equity markets.

If this occurs, then look for a revival in the carry trade. This occurs when investors, sensing the start of an increase in appetite for risk, borrow in Japan, convert the Yen to Dollars and buy riskier assets.

The set-up is there, the market just needs some muscle behind it to follow-through. This may occur next week when many large traders and institutions are expected to return to the trading arena after the Jewish holiday and the extended end-of-summer vacations.

Stocks Flat to Better; Obama Fails to Trigger any Interest

U.S. equity futures traded higher but inside of a range that held all morning. Money continued to flow out of T-Bonds and Gold which may be an indication that investors are gearing up for a stock market rally next week.

It was a slow morning for economic reports, but today’s business inventories number seemed to have underpinned the markets a little. The sideways action in the markets most of this week may have been attributed to the Jewish holiday, late summer vacations, uncertainty regarding the economy and the upcoming November elections.

Investors should be focusing on the movement of cash at this time. The money leaving the Treasury and Gold markets has to be put to work at some time and the stock market seems to be the most likely place to invest.

The liquidation of so-called safer assets helped to pressure December Treasury Bonds. The main trend turned down on the daily chart for the first time in several months after the last swing bottom at 130’12 was violated. The next downside objective is a Fib level at 129’11. The daily swing chart indicates 128’05 is a potential downside target by September 17.

President Obama’s press conference failed to generate any interest from traders although you can build a case that he didn’t say anything to break it either. He continued to push for the extension of the Bush tax cuts; however, he reiterated his attack on Republicans which turned off traders in my opinion.

Don’t be surprised by an intervention in the Japanese Yen over the week-end. This could drive up demand for risky assets.

Source: Courtesy of Brewer Investment Group, LLC; For more information, content and/or a preferred introduction to Brewer Investment Group, LLC and/or Brewer Futures Group, LLC, contact Investrend Syndications (via http://www.investrend.com/synd0001), and go to http://www.financialwire.net/?s=brwrgrprgw for other commentaries courtesy of the Brewer Group.

Brewer Investment Group, LLC, advises that Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from Brewer FX, LLC and Brewer Investment Group, LLC or its subsidiaries and/or affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of positions such as "spread" or "straddle" trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. For more information, content and/or a preferred introduction to Brewer Investment Group, LLC and/or Brewer Futures Group, LLC, contact Investrend Syndications (via http://www.investrend.com/synd0001).

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