Betting on Uncertainty - making 60 pip profit

Announcement of a rescue plan by the Treasury Secretary Henry Paulson – aiming to clear the banks' balance sheets – helped U.S. indexes to rose nearly 7 percent in the last two days of previous week. The plan must be passed by the congress when some members, especially from the Democrats, look reluctant to give the Treasury that huge power without making progress on their own policies.

It seems the bill will be passed but no earlier than this Friday. It is also noticeable to remember that the last week gains in equity indexes are mostly thanks to banning of short selling in the U.S. and some European and Asian markets.

In this environment I think the U.S. dollar could suffer in the medium term. The market will be flooded by $700B in coming months should the plan be executed.

But for this Monday, I found it a good time for buying Yen: 1- I thought that this uncertainty will affect the market sentiment negatively. 2- I also see that most of the optimism is priced at least in a daily-basis

I sold USDJPY at 107.07, making 60 pips profit when I closed it at 106.47. In my view, there are still much more room for appreciation of Yen (not just against dollar) in a week that is full of uncertainty and likely negative economic data.

How Paulson's comment could affect this Monday?

Just one month ago, on July 13, the U.S. Treasury Secretary Henry Paulson revealed a rescue plan for the two struggling companies Freddie Mac and Fannie Mea. At that time it made calm the market and brought confidence in financial system.

However his today's comment from Beijing could have different effect at least on the dollar. According to Bloomberg, he said that "we have no plans to insert money into either of those two institutions'' and he added that their earning result were "not a surprise".

Reminding the magnitude of the housing slump he said "we have got some serious issues that we're dealing with in our economy'', "I believe it's going to take us well beyond the end of the year to work through all the housing problems."

I think such comments could to some extent revive concerns about the health of the economy. But to what degree it could affect market in a daily-basis is a matter of experience.