But note that no matter what this kind of movement gets retracted and it seems like the more it happens the harder the retracement. Retracements can be ridden through with deep pockets, up to a point...therein lies the crashes.
In a way that is what happened to the equity markets in the run up to the crisis. They were fantastically bid up, partly with money from countries which made vast amounts of money by selling to the United States. That includes Europe which sold services, especially financial services.
But note the comment about the lessons from the crisis for the US. This was that banks should not have their own asset values predicated on assets which are in fact debts but Europe's wealth had strong derivations from exactly this, with the exception of Germany.
This happened at the level of banks and countries, in that counties borrowed to essentially add cheap cash to the flow of money, on loans backed by an economy itself. That was a bubble itself as it was based on a belief that countries could repay these loans (from that growth predicated on a US housing bubble) or that they would be backstopped by the EU. That seems to have happened, for now.
But remember what happens to complex systems, like economies or markets, when they are given an illogical statement. They re-write it until it is logical. There was nothing illogical about the crash. It is like one of those market moves which makes sense after the event, but one backed strongly by informational structure.
That is what I meant, currency moves are strongest when backed by the economy they reference, that deep logic. That is to say they become trends or reversals of other kinds of moves.
Money flow is good for order flow, but it engenders retracement. The fall after the the bubble returned the slope of the Dow to one which is consistent with realizable earnings. As probably did the crisis. The slope of the Dow up till tech, was predicated on the release of cheap cash from US government policy, from a housing bubble and the EU. Cheap cash for bidding up asset values, did not fall apart though until the crisis.
Even if there are attempt to let this happen again, it is probably not possible, but this bog has been watching for this. Asset values should rise resonant with economies. This is what shows in forex and is why EUR/USD tends to get revalued upwards when it seems like the money flow is being turned on again. What I have been saying is that certain currency pairs are sensitive indicators of an economy re-writing itself.
© 2010 Guy Barry - All Rights Reserved.
