China, already on the ropes, getting hit by European slump, dragging Aud with it.

* Equity markets continue dropping
Eur bid! Looks like a classic shortsqueeze although intervention rumours are floating around. Personally, I dont believe the latter. It would probably be one of the most silly things ECB could do. It would give a green light for a Eur collapse. Rather I believe Eur shorts are covering as risklimits are cut and losses forces consolidation. I prefer to view Eur/Usd at 1.25 as a sell.


* A vicious circle
Euro area deflation pushing down European demand, as Chinas main export market, this pulls down Chinese exports. As China is the biggest exportdestination for Australia, this drags down Australias exports. AUD is/was a crowded long trade for all the wrong reasons. Hence, we are now watching both a washout as well as a fundamental shift in the approach to the AUD.
It will have further to fall.

Further, with European banks under strain, this will reduce liquidity, same thing in China due to tightening measures and falling asset classes. Liquidity driven trades will now suffer.
Carry traders get carried out.


*With leverage further increased, we are now in a situation with very high stakes. Any missstep by politicians or centralbankers will be magnified due to leverage. Remember, there is no riskmanager or riskmanagement in this equation. No stoplosses. May the force be with them.
It seems it would be time for a shortsqueeze, but,,,,,?





* New trades and positionchanges
- Took profit on my long GLD
- Took profit on my long VXX ETF
- Took profit on my long QID ETF
- Stopped out my short Eur/Usd and Gbp/Usd spotpositions
- Sold Aud/Usd
- Bought Equity puts on equity indices and banks



As usual, good luck










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