The fundamental lean on EURUSD will revive the long-term bear trend. However, that doesn't mean the eventual disparity in monetary policy bearings and/or risk trends has to fuel the move now. We need evidence to show that the market is willing to conform to the fundamental outlook and price their anticipation. Draghi saying the ECB will review its stimulus efforts...
In a world where risk appetite is the common thread across the global financial system, the chances of a major stimulus program being updated ripples far out beyond the native currency. Draghi's remarks that the ECB will revisit its stimulus effort in December led to the expected tumble in the Euro and rally in European shares. However, the impact spreads well...
Large stimulus programs can change the global financial landscape. With the ECB saying it will reconsider its QE effort in December, risk appetite surged. Equities lurched higher and Yen crosses followed suit. For my USDJPY short, that would translate into a wedge break. It is unlikely to go very far however as both the broad risk implications and the focus ahead...
USDJPY is going to break from this consolidation. It is only a matter of time. In the past 12 months, when we've seen the ATR (10-day) for the pair hit levels these low, it has preceded a meaningful break or swing. The same is likely true of this instance, but when and under what motivation? With the BoJ Oct 30 meeting ahead and anticipation of a QE upgrade, it...
The correlation between SPX and VIX is both extraordinary and consistent. That said, we have exercised a lot of the immediate risk premium that was pumped up during the August market panic. For the short-term trader, that means the low hanging fruit has been picked. Is there underlying confidence from the the buy-and-hold crowd out there to carry us further or was...
China's 3Q GDP printed better than expected, but was still the slowest pace of growth in six years (). How to take that information? Is China proving successful in their effort to transition growth towards more sustainable sources and thereby see a stable downshift? Or is there trouble beneath these figures. Neither the Chinese-based CSI300 nor the more...
The Fed turning on the spigot of monetary policy may have started out an objective to jump start growth, but is the objective for accommodation still so virtuous? Here we have the effective funds rate (proxy for Fed support) versus US growth and the S&P 500 (speculative returns).
The VIX has continued to slide, leaving it only 2-3 vols above the recent natural floor established. That said, the inverse volatility index ETF can still climb more than 50 percent before it retest this year highs. One of these two will blink. My expectation is that another bout of volatility comes through and leverages the VIX / stalls the XIV in its tracks.
Here's a weekly chart of USDJPY. In the past three years incredible rally, there have been two very clear catalysts for this and the other Yen crosses to move significantly higher. Both are the BoJ's doing. Anticipation of their initial stimulus launch (QQE) was trumpeted to get the exchange rate and consumers mobilized. Currently, there is an even chance of a...
The past two-week rally from $NZDUSD is the biggest since November 2010. That is an aggressive counter-trend move that comes up light on fundamental backing. I expect it to level out and return to its dominant trend, but picking a top under momentum is a dangerous prospect. I prefer slow and considerate with establishing a shift.
The EURUSD's range development these past nine months has been pretty considerable, but its levels haven't held out as especially distinct (many temporary breaches). However, we get a good sense of the restraints on the market when looking at the weekly. A large, rising triangle with horizontal resistance around 1.15. This has room to move for now, but when will...
Over the past 12-18 months, the Dollar seems to have aligned itself to the same view and performance as the benchmark US equity indexes. However, that seems to contradict the currency's safe haven role. But to have such assets confirm to the haven (or a high-return for the matter) status, you need a definitive 'risk' skew.
EURUSD has pushed through 1.1400 as bulls gain traction amid interest rate doubts for the Fed. The same conditions that waylay a FOMC hike however can also cause problems for this pair. Financial and economic volatility would halt the central bank, but that can also revive demand for a haven - which the Dollar represents in spades. So this volatility (inverse...
Finally, USDJPY has cleared the constraints of its terminal wedge. However, that does not immediately signal easy follow through. There are important technical levels below around 118.50 and 116.00. Building momentum necessary to overtake those figures will require conviction and singular intent. An individual dollar decline is not likely to give the momentum that...
The Skew Index looks to measure unusual pricing for out of the money to signal warnings of major market volatility events. Just below 150, the reading is currently at its highest level on record. Meanwhile, the volatility of volatility has settled after an extended period of declines from the $VIX index. Complacent and risk intensive.
Mark this as a straightforward fundamental response. Russia's August trade report shows the smallest surplus in five years, and the USDRUB exchange rate jumps in reply. Immediate resistance is the extreme of that wedge and 38.2% Fib of that April-August bull wave.
Celebrating the biggest weekly rally from the SPX this year, I look back to the fundamental risk-reward of the market and temper my optimism. This version of the indicator is rudimentary (10-year Treasury yield as a baseline for return divided by VIX as a measure of risk), but the concept doesn't require complexity. Being bullish nowadays is more conviction than...
AUDUSD broken a five-month descending trend channel and subsequently closed above the 50-day moving average after a 96-day bear drive (the third longest period of weakness in over 15 years). That would seem a strong cue for those anxious for a big swing from a market that seems to be holding back from those big drives. Yet, there are a few issues. The long-term...