Despite efforts by the Fed to damp down expectations that quantitative ease is a done deal, the market ignored the hints and went about pricing it in aggressively. Low and behold, it may have gotten a bit too aggressive. Rates have zoomed up to 2.57% in the 10-year note and the dollar is rebounding on short-covering with the market set up for USD-weakness for month-end flows.
A bit of USD short-covering is at play, sending EUR/USD down to 1.3622 and USD/JPY up to 83.60. Heavy Japanese selling as seen at 83.80 earlier; large stops will reside above that level now.
Expect Asian and Middle Easter Central bank buying to resume in the 1.3560/70 area if the unwind continues in EUR/USD.
Large stops are rumored in the 1.5700 region, we hear as well.