Andrew Wilkinson submits:

The burden of fear has once again been placed with such subtlety on the shoulders of the dollar that many investors have so far failed to notice it. So accustomed to bashing the euro on account of its weakening fiscal and financial health were they that dealers created a maelstrom of such proportion that they were all caught up in how impossible it might be to ever see it subside. But the dollar’s six-month break from being the whipping boy has come to an abrupt end as traders at the margin pack up their short positions with several arguing that the best near-term bet remains a bounce for a technically oversold euro. And back above a reading of $1.2500 the common question surrounding Europe is fast becoming “what crisis?”

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Andrew Wilkinson submits:

Such has been this week’s market turmoil escalating fears over economic slow down and fanning talk about a double-dip recession, bond yields have already fallen to such levels that makes it hard to justify moving lower without severely weaker data. Friday’s June employment report carried a 9.5% headline rate of unemployment and failed to materially strengthen the case that the economy is moderating to a point worse than Federal Reserve members have already predicted. As such the dip in bond prices following the report offered a suggestion of surrender for the recent rally in yields.

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Clemens Kownatzki submits:

What started out as a promising year for equity returns, could transform into a mirage after all. The major markets turned south ever since the beginning of May. So far, the old “Sell in May” rule looks like very good advice given the more than 14% decline of the S&P 500 since the beginning of May.

The S&P 500 is in good company though. All major stock markets, with the exception of India which was essentially flat (+0.81%), showed a decline for the first six months in 2010. The next best in a crowded field of losers was Germany’s Dax which declined only 1.37% so far this year. All others, China leading the crowd, showed poor results at half-time in 2010.

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Gary Gordon submits:

On July 1, 2010, most market watchers focused their attention on stock assets. The story? A pullback in manufacturing, weakness in housing and an increase in jobless claims sent equities for a wild slide.

However, there was another dynamic at play in the world of currencies. In fact, foreign currencies were so strong, the US Dollar Index (DXY) dropped 1.7%; it also fell below its 50-day EMA …. its first unambiguous fall below this trendline in 7 months (click to enlarge).

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Hickey and Walters (Bespoke) submit:

Thursday’s 2.35% surge in the Euro versus the USD was the currency’s seventh best one day gain since 2000. As shown in the table below, the only other top ten gain for the Euro that came outside of the credit crisis was on 1/4/01 when the currency rose 2.3%. Another interesting aspect of today’s rally in the Euro is that of the top ten one day gains for the Euro, today was the only time when the S&P 500 moved less than 1% (up or down) on the day.

click to enlarge

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optionMONSTER submits:

By Bryan McCormick

US stock index futures are down this morning but well off the lows hit last night while Asian market were open. At one point, the index futures were down enough that they had nearly all broken the support levels noted in the cash index report we put out every morning.

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Yee Ong submits:

Let’s talk about the yuan from China’s perspective to better understand what currency policies are to be expected. A gradual appreciation of the yuan, if managed correctly, can help China contain inflation, strengthen foreign relations, shift its economy to one that is more domestic driven, build a path of making the yuan a reserve currency, and reduce the cost of imports for the Chinese consumers. But allowing a sudden big jump in the yuan will have dire consequences on the Chinese economy and, thus, is not to be expected in the near future.

Firstly, the decline of the euro as a result of the debt crisis has foreshadowed a bleak export environment for China as Europe is currently its biggest export destination. Europe has helped to cushion a drop in China’s exports after a drastic deterioration of the US economy. But the future of this export market is worrisome for China, as the yuan has already strengthened 17% against the euro this year. Just yesterday, Citigroup said that China would face “strong headwinds” in the second half of the year. Thus, further allowing the yuan to strengthen sharply against the euro would be an idiotic, if not suicidal, move for the Chinese.

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Aigail Doolittle submits:

The Ugliest Chart of All Time

And my number one reason to be bearish and to believe we are in the worst bear market of our collective lifetime.

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Andrew Wilkinson submits:

The dollar index is off sharply this morning despite ongoing fears over the sustainability of the global economic recovery. Manufacturing data from Beijing to Frankfurt and London all encouraged investors to worry about the potential for a second recessionary wave. However, the key driving factor in the currency world appears to be the credit provisions agreed between Eurozone banks and the ECB. A rise in borrowing costs appears to be insulating the euro, which blasted well beyond its midweek peak and looks like it may well be making a beeline for $1.2400 and beyond.

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