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01/20/2008 - Bloodbath on Wall Street

Posted by FOREX.com's Weekly Strategy in January 18th 2008  
* Bloodbath on Wall Street
* USD set to benefit as EUR shows cracks
* Commodities in the process of peaking
* RBNZ, BOJ and BOC rate decisions due

Stocks fell into the abyss this week as fears of a US recession mounted, even as US policymakers sought to assure markets they were intent on delivering both monetary and fiscal stimulus. To give you some historical context on the extent of declines, the S&P 500 is off to its worst annual start-ever. But equity market losses were hardly confined to the US, as all major global stock markets are now down between 8-12% YTD. In the midst of the rout in equity markets, the USD managed to hold up extremely well and is even poised to potentially break out to the upside in coming weeks, which is extraordinarily counter-intuitive to say the least. I think traders need to consider that we are currently dealing with a market that is responding much more to psychology than to fundamentals, and that always makes for difficult trading conditions.  Full text »

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