Currencies Feel the Flow ... of Capital Rushing In and Out of Global Stocks

Looks like someone popped the champagne cork too early. I say that because stocks made short order of Monday’s record climb. On Wednesday, the Dow dropped the most in 21 years. The plunge of over 700 points erased over a trillion dollars in market capitalization – only the second time that’s happened ... ever. As the worldwide effort to shore up banks and lending settles in, investors are realizing much of the damage has already been done. Certain interbank rates and money-market rates are showing improvements in the cost to borrow. That’s a testament to extremely motivated governments and central banks.

Is the dollar due for a correction?

Of course we wouldn’t ask the question if we didn’t believe the chances are good. But, the major caveat is the same we’ve shared before—in a fundamentally-driven market (or major event-driven) the technical analysis takes a back seat. So, we do our technical work, but keep in mind this is a market of breakout trades lately i.e. no matter oversold or overbought sell or buy the breakout has worked.

New Global Intervention and Our Technical Analysis Might Signal a Rest

Last week there was a huge cooperative among the world’s central banks to cut interest rates. Central Banks in the US, UK, Sweden, Eurozone, Switzerland, China, South Korea, Taiwan and Hong Kong all got involved.

It wasn’t been long before the market mostly ignored this heavy‐handed effort. And apparently the Federal Reserve didn’t have much confidence that global rate cuts would shore up investor sentiment either.

Central Banks Get Out The Butcher's Knives

The Federal Reserve cut their benchmark interest rate by 50 basis points today.

And so did the European Central Bank ...

And so did the Swedish Riksbank ...

And so did the Bank of England ...

And so did the Bank of Canada ...