FOREX ALERTS >>
DailyFX Plus Login

fundamental alert

Article

Dow Jones Plummets Below 9000 and Japanese Yen Rallies; USDJPY Forecast to Drop on Further Dow Tumbles
Thursday, 09 October 2008 20:30:49 GMT  |  David Rodriguez, Quantitative Analyst
Delicious
Facebook

The US Dow Jones Industrials Average lost over 7 percent through the day’s close, leading the Japanese Yen substantially higher in the last hour of the New York forex trading session. The Dow initially gained through early morning trade, but once again we saw that panic struck financial markets and led to sharp sell-offs in risk-sensitive asset classes. It is subsequently little surprise to note that the Japanese Yen would appreciate in such an environment—the correlation between the Yen and the Dow Jones currently trades near its highest in at least 10 years.

 

Dow_2008-10-09

Dismal risk sentiment across global financial markets may subsequently lead to even further declines in the Dow and rallies in the Japanese Yen; we likewise note that the S&P 500 Volatility Index recently reached its highest levels on record. There seems to be relatively little in the way of further equity market declines. Until we see traders willing to buy into recently breathtaking market losses, a continued panic could continue leading the Dow and other US indices lower. In fact, the Dow Jones Industrials have now lost for the seventh consecutive day of trade—the first such occurrence since July, 2002. It was at that moment in 2002 that the Dow momentarily bounced and subsequently plunged below 8,000 in a matter of days.

Written by David Rodríguez, Quantitative Analyst for DailyFX.com

To contact the author of this report, e-mail drodriguez@dailyfx.com

More Articles

Feedback Form