Just take a look at the picture above. It’s a chart of the AUD/USD Forex Pair. In one fell swoop the dollar has wiped out the gains from weeks before. Look at the last bar that represents the day’s trading. There is no shadow. It was a straight drop. Pretty hardcore. it is slightly exagerrated on this particular currency pair, as the Australians had some worrying news to compound the situation. That said, the sentiment pervaded the Forex market today. Risk aversion is back in a major way…at least for this day. End Result: Yen and Dollar have a great day.
It’s happening like we thought it would, except it seems slightly more intense than I had estimated. Some of the bad news isn’t even in yet! The Equities had a pretty bad day. I don’t think we can say that we are heading back down though. I think the bottoming process is expectedly more complex than that. We made some big moves in an upward direction recently. It is only right that there be some correction. We can still expect some more moves lower. There is some way to go before we start panicking about the prospect of a longer recession than is already on the table.
So, for the rest of the week: Watch/listen/read the news. If more bad news comes out, then we will have some more downside. However, I don’t expect the dollar to gain much more in the short term.