Archived IMT (2010.09.28)

US DATA DOUBLE BLOW BOOSTS EURUSD & METALS as US consumer confidence hit a 7-month low at 48.5 and the Richmond Fed manufacturing index dropped to -3 from +12. FX markets have grown reluctant from bidding up the US dollar on falling equities because data deterioration implies the inevitable; escalating asset purchases from the Fed to the point of inflating the balance sheet beyond the $2.3 trillion limit. The FED's MANDATE is to support maximum sustainable employment and stable prices. Both have undershot; FX markets can afford to extend euros run-up based on improved conditions from the core nations and on the notion that IMF and EU credit facilities would be sufficient to support Ireland. $1.37 now appears ripe as the target of the reverse H&S formation, especially if a close above $1.3510 is held today.