Velocityshares Daily 2X Vix Medium Term (TVIZ)

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FXA<USD>FXY. What Does This Mean?

The currency markets are the drivers of the credit and equity markets through a transmission mechanism. This makes sense since a currency movement affects EVERYTHING.

So if the Aussie is a growth/inflation loving currency...which it is, and the Yen is a growth/inflation hating currency...which it is. The USD falls in between.

So which way is the world moving now the USD is best over both the yen and aussie?

Well that depends on which 'best' currency we moved from.

If the aussie was best and now it's the USD the world is slowing down and inflation less of a problem.

On the other hand if the yen was best (which it was) and now it's the USD the world is speeding up and inflation more of a problem.

It's best to be in the long bond when the yen is best and short the long bond when the aussie rules, or when the movement is from the yen to the USD. Likewise go long on the long bond when the movement is from the aussie to USD.

Think of the world's financial assets as a pyramid with the base being currencies and you can understand the importance of their movements.