The Dollar Dump did not come last night, and the Monday Stock Surge evaporated as well. We are seeing the footsteps of a sea change in markets, but it won’t be sudden or straightforward.
Case in point: Gold has dropped very sharply, enough that Neely seems prepared to call the top in, although shortly after his morning newsletters Bernanke tried to diss expectations of a pending rate increase, and gold promptly shot back up (see chart), but is still down for the session. Equities fell sharply after digesting Ben’s statements, then have recovered a bit.
The Japanese Prime Minister’s speech was a non event – he hasn’t figured out what to do yet.
More interesting is that the Euro has been trading below a key level of $1.4872 (and below its 50DMA). This can raise predictions of a drop towards $1.44, but Mother Market likes to fool, and Neely’s wave count allows one more jink back up. Again, this revolution won’t be televised, but will sneak up in a few false breaks before it hits. We seem to be close.
The currency duo to watch is the AUD/USD. The AUD is a big beneficiary of the USD carry trade, and its fall (when it occurs) is a great signal of the sea change in positions globally. I will post later on a possible cause of its demise coming from the Prime Minister’s policies at the Copenhagen conference. Simply put, they embody economic suicide for Australia. Likely the markets do not believe they will ever be put in place, but we shall see if something happens this week. If the AUD breaks below 90c (specifically 89.50), the next level down is around 83c.