Dollar Index - show of strength

USD index has strengthened again against all the major currencies. The expectation that ECB will cut rates more than previously expected led to strength in US dollar.

I am making a slight adjustment to my previous wave count. I think the intermediate bottom in USD is now formed and it can move up strongly from here. However current wave count would need a revision should the USD index trade below 79. On the whole USD index might touch 100 levels in next few months. Take a look at the graph.



The US credit markets are showing signs of easing.

The tight liquidity conditions in US credit markets are easing. This is evident by the fall in TED spread. The TED spread is the difference between the interest rates on interbank loans and short-term U.S. government debt ("T-bills").



Issuance and total outstanding issuance from financial firms are also rising pointing towards easing up of markets.



This augurs well from general market conditions on the whole. Equity markets have been under tremendous selling pressure. A rebound in equity along with a rise in bond yields may give some positive signals about the underlying strength of the market. However there is no such signal currently in the market.