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FOREIGN CURRENCIES TUMBLE

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In early April, I expressed the view that the rally in the U.S. Dollar Index was coming mainly from weaker European currencies which meant that the dollar rally wasn't as widespread as it appeared. To support that view, I showed three foreign currencies that were rallying strongly against the greenback that included the Australian and Canadian Dollars along with the Brazilian Real. It didn't hurt that those three currencies were tied to commodity-producing countries and showed that global traders were still willing to assume some risk. That situation has changed. The next three charts show all three currencies plunging below their 200-day moving averages. The hardest hit by far is the Aussie Dollar. Chart 3 shows that high-yielding currency plunging to the lowest level in nine months. Money leaving high-yielding currencies usually flows into lower-yielding ones like the Japanese yen in a flight to safety.

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John Murphy
About the author: is the Chief Technical Analyst at StockCharts.com, an renowned author in the investment field and a former technical analyst for CNBC. With over 40 years of market experience, he is the author of numerous popular works including Technical Analysis of the Financial Markets and Trading with Intermarket Analysis. John's timely market commentary and expert analysis is available exclusively for StockCharts Members through his Market Message blog. Learn More
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