Forex Investment and Currency Trading

Markets in FX reveal the global panic and fear in assets.  CHF and JPY gained, AUD, NZD and CAD lost.  Oil is down almost $4; Gold up almost $42.  News set overnight focuses on the Japanese insurer going under, Libor going up again to highest levels of the year; GE profits meeting forecasts; Canadian employment better.  The market has been praying for a bottom for a week and it’s not yet delivered as equities are set for their worst week since 1970 – and the DJIA the worst week ever.  Impressive amount of wealth destruction should lead to further actions from officials and that is already the discussion.  Today is about what happens at the G8.  The key point about the present mess is that the crisis has global reach.  Thinking that the solution can be local misses the greater problems and so coordinated action has to occur.  The risk for the markets is that they rally back a smidge today in anticipation of G8 agreement and sell-off on their inability to deliver.  Talk overnight from the WSJ that the US is now considering backing bank debt and insuring all bank deposits without limit didn’t seem to help markets in Asia.  Intervention in FX in KRW notable – but temporary – as we saw in BRL and MXN yesterday – revealing that the JPY, CHF moves have an underlying connection to USD demand abroad still – this is a funding crisis still.  Many people have called for a bottom, for a relief rally, and the inability to string together any bounce shows the dangers in that thinking.  Volumes have been light in many places – not the sign of full capitulation.  Rather than one giant shove lower consider markets to be like a forest fire – the way to stop it may just be to let it burn out.  If we get one ill wind the risk is high that the fire starts somewhere else.  So best to look for the next risk – which may just be in FX today as it was relatively calm.  Perhaps we need to see another significant move in G10 currencies to rattle the cage of the G8 as they meet today in Washington.  Every time we have had any government official speak markets flee – perhaps it’s because the solutions keep getting bigger and more frightening.