franckbelfort
Education

Who says bond market says currency market

You have front of your eyes the evolution of the relationship between the currencies of risk appetite and the currencies of risk aversion since the exit of the financial crisis of 2008-2009 to today (at the dawn of a new market shaking). We find ourselves curiously in the same configurations and this seems to ripen quietly week after week.

Note: The markets are cyclical, needless to remind! But in this case, it's worth it! Since central banks are only increasing their exchange reserves on a cyclical basis, that is to say that in view of the macroeconomic policy of broadly way at the events that took place in international finance, either the Central banks have temporarily ceased to inject money into the economy or they have increased marginally given the volume of trade in the currency market; But they have not diminished in any case cyclically. The red curve symbolizes the rate of progression of risky currencies compared to non-risky currencies. As well as the white curve represents, the spread or the differential between the currencies in a phase of appetite for risk and currencies in the phases of risk aversion. What we see in a global way is that we are in a phase of appetite for risk which is symbolised by increases in interest rates, increases in the rate of bond yields also, and therefore risky currencies are an attractive For investors. This study that is on the graph shows us or confirms us too if we find ourselves actually in an easygoing market, or in a market of fear. We see that from 2009 to 2012, we were in a complacent market; Then from 2013 to 2016, it was the return of the risk noticed by the peak of the VIX and the frictions of the two curves surrounded in green that graphically show the Greek bond episode in Europe and the Chinese stock market crash (June-September 2015,-30%). Whenever one has a technical friction between these two curves since 2009-2010, one changes at the time of cadence and bias because the friction of 2009-2011 between the two curves also symbolized the beginning and the upward upswing of the stock market. We also see that these two curves deviate strongly to validate the beginning of the mighty Bull run. Then, the phase of stabilization see a continuation in view of a rhythmic progression of 2012-2015, one sees a tightening at the level of the differences that had previously been between these two curves. And finally on arrival, from President Trump in November 2016, the US indices explode, by chaining records and we also see almost simultaneous, the friction of 2016-2017 which still leads to a new downward momentum on the spread of Change (risk vs. non-risk) which therefore marks the presence of a market-complacent bias. As a reminder, the indices change inversely with exchange rates. Since 2017, to now, the currency gap, is evolving in a bullish channel , thus highlighting, that we find ourselves in a risk-bias, and this also validates the multiple turmoils that the US indices have been facing for some time. And as long as we progress in this bullish channel , it will therefore support, the hypothesis of a Bear market maturing.

Conclusion: We are in a bullish corridor, so in a technical way as long as we continue this path, the indices will remain under pressure until perhaps a possible new friction to mark a return of complacency that would advance the markets. The pace of progression of risky currencies according to non-risky currencies evolves very weakly, marginally, and is found almost at the same level of 2009-2010, while we conduct ourselves likely, towards a potential bubble or even Its breakdown for the financial crisis. Any other thing being equal, financial crashes start first in the bond market, and ' ' that says bond currency market says in a same time currency market ' ', therefore the interventions of the central banks in view of the next maturities will prove Crucial.
Nice work and arguments Thanks! :)
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franckbelfort WallStScalper
@WallStScalper, made my day! Thx a lots :)
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