Professional system trader Art Collins shares his daily biases in the index, bonds and currency futures markets for September 22.

So what does this rescue do to the dollar? Friday may have provided a clue to the near-term direction.

After a wild week of trading, the US dollar ended the week lower as prospects of further intervention by the US government in the financial markets provided a boost to carry trades.  Indeed, with the fed funds rate sitting at 2.00 percent, the US dollar is essentially a low-yielding currency like the Japanese yen.

As it was with the rest of the currency market, the evolving financial crisis from this past week elicited incredible volatility from the world’s most liquid currency pair.

The Japanese yen saw an incredible week of volatility against the US dollar and other major forex counterparts, as dramatic shifts in the US Dow Jones Industrials Average and other major risky asset classes led to similar movements in the East Asian currency.

The UK calendar is noticeably bare next week, with Pound price action taking its cues from US dollar sentiment.  Rightmove House Prices will likely continue to see declines in September as the housing shows now signs of letting up.

One way or another, real prices must come down. That’s just the way it works.

The main take away from the recent developments is that we will not see a V-shaped economic recovery. According to the data released this past week, the housing market and the manufacturing sector are still in trouble.

The US dollar plunged nearly 1 percent against the euro and also fell versus most of the majors on Friday – especially the commodity dollars – as prospects of further intervention by the US government in the financial markets provided a boost to carry trades.

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