Without news on QE 2.5, QE2 coming to an end accelerates unwinding of carry trades

At time of writing (Thursday 02:30 am),

·         The Aussie dollar fell TODAY from a high of 1.08874 to 1.06656, the Euro from 1.44226 to 1.41874 (and both still plunging!)

·         Similarly, commodities like Gold from US$ 1526 to US$ 1496, Crude Oil from US$ 104.67 to 97.50.

(Technically, the Head and Shoulder formation Is getting more prominent in ALL of the above Daily charts! – meaning, there is a stronger tendency to go South).

The USD Index rose from a Year 2011 low of 72.86 to 74.20 last week and current 75.54

(Technically, the INVERSE Head and Shoulder formation is getting more prominent in the above Daily charts! – meaning, there is a stronger tendency to go North)

Last Friday, the important US Non Farm payroll figures (244K) SURPRISED on the upside. Initially, this would mean positive sentiment for the global economy and higher risk assets, like commodities, high yielding currencies and equities - rose.

However, the positive US economic data also boosted the US dollar up to a point where it meant a stronger US dollar leads to a fall in commodities, like crude oil and high yielding assets.

Though the fall in Crude Oil meant lower inflation, the fall in equity related Crude Oil and metals also dragged down US stocks!

In Currency news, the Euro plunged on an anti-austerity strike in Greece and a new warning from Standard & Poor's about Portuguese banks that added to investors' worries about euro-zone sovereign debt. Though, the events are not news, It looks like the global investors triggered the event dragging commodity currencies much lower

In conclusion, unwinding of carry trades, had begun, that is, seeking lesser risk from high yielding assets to lower risk assets, namely the US dollar.

While I do not know how long this would continue, I would stay on the sidelines until volatility had simmered down. .