We are perilously close to giving back all the gains made on Monday of this week as the markets remains paralyzed by fear. Credit markets remain locked down tight despite yeoman efforts by the Fed, ECB, BOE and others to reliquify the markets . Despite all that, fear is rife. 1 month T-bills yield a single basis point at the moment. Give the government you money and they’ll give it back to you in 30 days. Suddenly we have our own zero interest rate policy here in the US, unless you need to borrow.
All this is reflected in the currency markets as EUR/JPY comes back under pressure as it has been for much of the last month or more. Stocks markets big and small took it in the teeth today, commodities resumed their slide and interest rates are falling along the coupon curve again. Hedge funds continue to liquidate and the ripple effects of the Lehman bankruptcy continue to reverberate. It will be another 10 days before all the credit default swap nonsense is settled, keeping investors on edge.
Keep positions small and keep one eye on the Dow, because all we do is follow the leader, sad to say.
Now that 135.00 has given way, technicals suggest a full retracement to the 132.25 level in EUR/JPY.
