• Dollar Ready to Rally as Europe Devolves into Crisis, G20 Sanctions Speculative Capital Curbs
• Euro: What is the Likelihood of a Second Crisis and How Would the Euro React to such an Outcome?
• Japanese Yen will Have to Prove Itself as Risk is Stirred and 3Q GDP Data Quickly Approaches
• British Pound may not Enjoy its Stimulus-Postponement Rally for Long
• Australian Dollar: A Hearty Fundamental Backdrop can Prevent a Major Selloff but not a Risk Reversal


Written by: John Kicklighter, Currency Strategist

Dollar Ready to Rally as Europe Devolves into Crisis, G20 Sanctions Speculative Capital Curbs
The dollar's performance Friday was relatively disappointing on a close-to-close basis. Though volatile and setting a new monthly high on a trade-weighted basis early in the session, the currency would ultimately end the day little changed and slightly in the red. However, this particular aspect of performance is not what we should be concerned with. The fundamental and speculative potential lying ahead of the market is what we should be focused on. While it is no guarantee, the capital markets are at their greatest risk of reversal since the most recent bull phase began back at the start of September. We can see this potential in the benchmarks for investor sentiment and capital flows. In equities, the Dow Jones Industrial Average has tentatively broken its multi-month rising trend with a move below 11,200 - even though the S&P 500 has yet to do the same. For commodities, crude has suffered a massive reversal and gold put in for its biggest decline since July 1st. Even corporate bonds and Treasuries have taken a hit. This same sense of risk can be established in the currency market. Favorite investment currencies have started to retrace gains while overlooked safe havens have put in for a slow recovery. This shift led AUDUSD to drop back below parity and USDJPY has even threatened its long-term bear trend. Yet, it is EURUSD that will likely benchmark the dollar's future...

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