It appears that evidence is pointing in favor of a reduction in the federal funds rate, and the FX, bond, and equity markets will likely continue to reflect that if ISM manufacturing is released in line with or worse than expectations.

The 10-year note already yields less than 4%. Bonds have been falling since June. They are just another of the many signs of deflation – of a draining away of credit, cash, liquidity – from the markets. Now the Fed is no longer driving inflation; it is trailing along behind deflation, trying to keep up with it.

The US dollar has rebounded but don't be fooled into thinking that this is a bottom, because US fundamentals continue to point to further dollar weakness.

It would not be surprising to see the USD/CAD pair fall down towards 0.9500 in coming days. However, Canadian economic data may limit losses as GDP for the third quarter is expected to slow, giving the Bank of Canada reason to consider cutting rates next week.

“Pushing on a string” is an expression that describes what happens when a deflationary spiral gets out of control. The financial authorities can offer more money on better terms, but the banks and the borrowers are already having trouble paying off the debt they’ve got; they don’t want any more. Besides, they’re not too sure that others will be able to pay their debts either.

Carry trades are back, but USD/JPY is struggling to sustain its gains above 110, which suggests that further gains in carry trades may be limited.

The US dollar, equity markets, and Treasury yields could stand to gain as annualized GDP for Q3 is expected to be revised higher on Thursday.

The US economy is not out of the woods.

Professional system trader Art Collins shares his daily biases in the index, bonds and currency futures markets for November 28.

Tim Bourquin interviews Pinoy Trader, who talks about the strategies he uses, and how he measures his own success in the markets.