Eoin Treacy's view Against a background of slower global economic growth, stagnation in the USA, Europe, the UK and Japan, monetary tightening in Asia and financial sector turmoil in Europe and the USA, investors appear to favour the liquidity and relative stability of the US Dollar. The Fed's announcement that it aims to lengthen the duration of its sizeable bond portfolio to 100 months from 75 has helped bolster demand for long-dated government bonds and the US Dollar. (These topics were also discussed in last night's audio).

US 30-year yields fell below 3% yesterday and while oversold in the short-term, a break in the progression of lower rally highs would be required to question current scope for additional compression. This is a powerful, government-supported, momentum move. At these levels, investors are unlikely to be buying for yield but more in the hope they will be able to sell to the Fed at a higher price.

The US Dollar has also benefitted as investors seek a haven. The US Dollar Index broke out of its four-month range earlier this month, pulled back to find support in the region of the upper side and broke upwards again today. A sustained move below 77 would be required to begin to question current scope for additional upside.

I thought it might be instructive to examine where the Dollar's rally has been strongest..

The Asia Dollar Index broke its progression of higher reaction lows early this month, fell below the 200-day MA this week and extended the decline today. This is the largest reaction since at least 2008 and demonstrates a short-term preference for Dollar assets rather than those of some of Asia's fastest growing economies.

The US Dollar broke its 18-month progression of lower rally highs against the Korean Won last week and extended the advance this week. It also posted a large rally last year but this quickly petered out. On this occasion a clear downward dynamic will be required to question current scope for additional upside. The Kospi Index continues to range below the 200-day MA and the psychological 2000 level. A sustained move above that area would be required to question the medium-term supply dominated environment.

US Dollar strength and additional selling pressure is observable on a wide number of stock markets primarily in Asia and Latin America. At this stage Wall Street has become a relative, if not an absolute, outperformer.

The Indonesia Rupiah and the Jakarta Composite,
The Taiwan Dollar and the Taiex,
The Singapore Dollar and the Strait Times Index,
The Indian Rupee and the Nifty Index,
The Thai Baht and the SET Index,
The Malaysia Ringgit and the Kuala Lumpur Composite,
The Philippine Peso and the Philippines Composite,
The Offshore Chinese Renminbi and the H-Share Index,
The Australian Dollar and the S&P/ASX 200,
The South African Rand and the Johannesburg All Share,
The Brazilian Real and Bovespa Index,
The Mexican Peso and Mexico Bolsa,
The Chilean Peso and the Chile Select 40,
The Canadian Dollar and the TSX.

In the above charts, currencies have been lead indicators. Today's US Dollar rallies were not sustained against the Indonesian Rupiah and Brazilian Real which is a tentative sign of investor interest in these markets. At some point, the weakness of the above currencies against the Dollar will act as a tailwind for their respective manufacturing and export sectors. The opposite is true for the corporate profits of US multinationals as the Dollar appreciates. However, in current charged environment this is unlikely to have a significant bearing on investor decisions.

The US Dollar's rally has also initiated a flight from commodities. All industrial metals plunged today, soft commodities fell aggressively and the precious metals sector also experienced selling pressure. Copper has extended it breakdown from the Type-3 top formation as taught at The Chart Seminar. Palladium has broken downwards from a similar Type-3 top formation. Perhaps most important of all Brent crude fell by more than $4 today maintaining the six-month progression of lower rally highs. The potential for at least a retest of the $100 level has increased and a decline beyond that level is also a distinct possibility.