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So I wanted to try and take some stock of what’s been going on so far this year. Some of you will know my “fundamental” view for this year has been that as the Federal Reserve changes its policy stance, so the US Equity Markets will adjust and vulnerable emerging market economies that depend on foreign inflows will be vulnerable too. Any markets that had benefited from all that lose fed policy such as emerging market economies, commodity bloc economies and equity markets should all feel the pain of this capital rotation, and therefore rallies in these markets may well turn out to be a series of lower highs.

The greater the dependency on foreign inflows for growth, the more exposed the market. We had seen quite a bit of pressure in most of these markets in January, and it shouldn’t have come as a complete surprise to see a bit of relief into February. Nevertheless one Swallow does not make the Spring and therefore my view is that these relief rallies are just that, impressive and all as they are. As I’ve wrote in recent articles the trick here is to stay out of trouble and not overleverage so that you can handle the ebb and flow.

Then from a technical point of view I have been looking for opportunities to execute my theory when the price set-ups look compelling. I have also been executing short term trades in USDCAD and in and out of AUDNZD. Actually a lot of my trades have involved Kiwi in one form or another and the reason is that I am expecting it roll over like CAD and AUD being a commodity currency too. Markets move in cycles and sooner or later I think they will get around to Kiwi which seems to be in the process of forming a major top against the Greenback.

The other means by which is wish to play USD strength this year is via USDJPY but I’ve had a long wait. I think we are finally getting close to the 99-100 area. Yesterday was quite a bearish day. I will look for that pull in to triangular support around 99 through the 200 day MA at 100. This will likely happen in an environment where capital is looking for security and so it will be a day when the Swiss Franc has strengthened and likely when the S&P has dropped. At these approximate levels I see an end to traders looking to flee to the Yen for security, as Shinzo Abe’s “three arrows” policy becomes overwhelming and begins to further weaken the Yen to that 110-112 area some time in 2014. If this comes to pass it will be a home run of a trade so it is worth the wait. I remind myself that trading does not always mean executing trades. More often is means sitting, watching and waiting.

Gary –