Today was such a strange day, that is making me waste a Friday Night in pondering what was up with that move today. In the overall market we saw big money sliding out the back door selling in a nice steady way while retail was playing the “Lets buy at the Europe Close” dip and feel like pros. On Economic News we saw German Ifo data showing that Germans were very OK with the current market conditions but not so giddy six month from now. We also saw the German GDP confirming earlier GDP data that Germany escaped recession by having a .1% GDP, (that is it, .1%). We had Draghi Speaking but it was more jokes then anything, with little value. What was interesting was that the Italian and Spain’s Bonds finally started to move, the 10 year was up over 4% last night, it appears finally that the Fund Managers realize that Japan Funds are not investing in Foreign Bonds but are buying up Japanese Corp Bonds and Japanese Equities. This gave us a weaker eur/usd from the European session (but Eur/JPY just sat there). US saw good headline Durable Goods data, but that is April Data and of little value because of its lagging nature, except we did see Work Week Hours coming down fwiw. SO, now, back to the Original Question. The Aussie sell off was across the board of AUD/JPY, USD/AUD, etc…Global Growth is fading like global PMI’s and the trading world is following Drunkenmiller’s call of shorting the Aussie.So what is happening?  Normally, the US Dollar would benefit from the dumping of the Aussies and yes, the Aud/USD did go down to the .9630ish range vs the .9877ish range in the Europe Session. But we also had USD/JPY sink and our bond yields not push up even though POMO was not buying today. Koroda was talking up a storm and BoJ was in trying to control the JGB’s in the Asian Session,( they shot up to 1% early in the session and swung crazy),but with a market pull back and global growth plays sinking. why didn’t our dollar or long bonds get moving up? I know the bond market closed early. But, it really didn’t make much sense? If it was expected QE lasting, then wouldn’t we see buyers in the Aussie? What a strange divergence.

For Next Week, the trend is down even though I have to deal with end of the month window dressing and f/x passive fund rebalance (plus the pop in CAD and Euro from the payments from Oil Companies to Canada and UK payment to the EU). BUT we have Italy going back to the Bond market on Tuesday (EDIT F/X CALENDAR NOW INDICATES THE BOND AUCTION WILL BE ON THURSDAY) and imho we may see a much weaker auction then the No fear auctions that we have been seeing. Aussie should continue the trend down and the USD should start to move up as it starts a sweet Nine Year Cycle of Strength, but I should say that because I am a Bear…roar…Happy Birthday Fly.

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