Debase or die. That appears to be the lesson taught to the world’s central banks by the US Federal Reserve. By keeping both interest rates and the US dollar artificially low for long enough, Ben Bernanke and Company have apparently pulled off a feat that was nearly unthinkable 5 years ago: stopping a global meltdown that had the potential to make the Great Depression of the 1930s look tame and putting the globe’s biggest economy on a path to recovery.

We can argue the long-term merits (or demerits) of the Fed’s RX ad-infinitum, but the bottom line is: it’s working. Should we be surprised then that Prime Minister, Shinzo Abe and the Bank of Japan would adopt the same strategy or that European Central Bank President Mario Draghi would (finally!) pledge to keep European interest rates low for an “extended” period?

Yen 7-10-13

Both the euro and the yen are down this morning. We think they have a lot further to go. However, with both markets displaying oversold conditions and approaching support at old lows, we would not be surprised to see some kind of corrective bounce which we would be happy to sell into. This doesn’t mean we want to exit our short positions completely.

Euro 7-10-13

If you own less than two of the spreads we suggest exiting half of below, stick with them. Multiple position traders make want to consider taking a bit of cash off the table here with the notion to get more aggressive on corrective rallies.