What a difference a week makes. Last Friday the Fed came to the rescue and cut the discount rate in an effort to soothe rattled credit markets. The move appears to have worked, at least for the moment. In the ensuing calm this week, equity markets recovered and currency markets reverted to old habits-selling the USD and buying JPY-crosses (the carry trade). This week was notable for the absence of any significant data reports, meaning the market was left to trade primarily on sentiment and technicals. As the flow of negative credit news abated, again for the time being, sentiment was able to recover, bargain hunting followed, and as prices stabilized, momentum traders added to the recovery.  Full text »

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Filed under: Weekly Strategy