12 May Euro battle at 1.3560

So far the rating agencies have not downgraded US debt, never would they, though they were rumours in January.
The bankruptcy of US Federal Reserve would come in the form of a USD crisis. We are getting closer to it with the current recession.
(a) The Ferderal Reserve was not able to account for the Trillions on their books
(b) The stress test did not include assets, only the loans. Hence it is not an actual stress test.

If the FED include 5yr dated CRE securities in their TALF, then inflation expectation would break lose. (not inflation, but the expectation of it). Yields would go up, and mortgage rates would return to high level, when a fresh avalanche of ARMs are about to reset.

You can see the flood of secondary offers in the markets now, every corporate trying to raise cash. And that is the reason for this rally, to create an environment that the buyers can justify their purchases of equiies, new debts, etc.

Having said that believe the market would continue in range till OPEX, 900 to 930. trying to keep this rally alive as long as possible, until the corporate bails out. The excess liquidity FED has given is used to bail out the corporate.

It is just a matter of time when we enter into a protracted winter.

We contiue in the battle at the breakout.
By Europe open, the bag banks would have decided how to read Bernanke statement at Jerkyll island.
Would they decide to push Euro higher or stage a USD recovery.