JohnKicklighter

JohnKicklighter

We know the USDCAD-Oil correlation. It seems to be a favorite for those that track cross asset relationships, and the fundamental link makes sense. However, here is one that you may not consider: AUDNZD. Both are commodity currencies, but one is known for 'hard' and the other 'soft' commodities. So, I overlaid the exchange rate with a Gold-Live Cattle comparison....

JohnKicklighter

Risk trends have enjoyed a strong week...without China. The Golden Week has been just that for global shares, and China will open to an adjustment that matches that performance. Yet, that doesn't mean their catching up will insight new bullish interest. With the S&P 500 facing down 2,000 and liquidity filling back out with a more volatile segment of investors, we...

JohnKicklighter

Fed forecasts have cooled significantly over the past weeks with a particularly acute shift to 'certainty' among the doves after the September NFP report. However, if a delayed rate hike is the root of the Dollar's recent troubles, the bearish motivation may soon ease up. Rate forecasts through the end of the year are nearly deflated. Risk aversion as a motivator...

JohnKicklighter

There is plenty of anticipation for a QE upgrade from the BoJ, but it sounds more like hope from speculators rather than concise analysis as to why more stimulus would generate long-elusive economic objectives. Without more stimulus, we may find the Yen crosses start to retreat in earnest. Without the BoJ's QQE program (Apr 4, 2013) and its subsequent upgrade (Oct...

JohnKicklighter

There is a strong relationship between the Dollar and the US benchmark rate. There is some debate as to how the two relate, but the benchmark rate can be construed as the 'dividend' for the currency. Looks like we are anticipating that dividend so far..

JohnKicklighter

On a simple 'risk' view, it should be the natural state of being for the S&P 500 and USDollar to move in opposite directions - one is a high return and the other a renowned safe haven. However, the correlation between the two has been strongly positive over the past couple years as a steady Fed maintained stimulus at the same time as it contrasted more...

JohnKicklighter

A delay of a Fed rate hike seems to be the market's immediate concern when it comes to risk trends. Yet, as global growth cools, the expectation readily escalates to expectations of more stimulus. Yet, more quantitative easing, is unlikely to provide the backing the system needs. Yields are already exceptionally low and the positive influence on growth following...

JohnKicklighter

Hurricane Joaquin is heading for the East Coast of the United States and threatens to be the first major storm to make land fall this season. Though it will miss the Gulf, could still heat up the supply-demand concerns in the energy complex. I'm watching to see if the spread between US-based WTI closes in on Europe's Brent continues to close.

JohnKicklighter

Rate expectations for the Fed have collapsed as the Fed repeatedly pushes back its launch date. While still expected to be the first mover on the rate front, the Dollar is no longer continuously building its premium. That has led to a plateau for USDollar after a 10-month climb. To shake it lose, the skepticism on rate forecasts needs to lift. Can NFPs - more...

JohnKicklighter

Here we have global shares, commodities, high yield, emerging market and frontier market measures (biotech is marked invisible) set against the S&P 500. These are all varying intensity risk benchmarks, and their performance for the past quarter and year has shown a distinctive conformity. Risk aversion is likely to take the torch on major market moves heading into...

JohnKicklighter

I have looked at USDJPY through its 'risk' lens exclusively over the past months and have missed out on considerable potential in the short-term. Over the past weeks, there has been a remarkably consistent range which I have overlooked awaiting for the eventual collapse in speculative risk trends - which will likely pull down all Yen crosses. So long as risk...

JohnKicklighter

The recent drop from the SPX has proven abrupt, but it may be historically so. Using a weekly chart and Bollinger Bands - standard 20-period MA and 2 standard deviation settings - we find price marked its biggest downside move beyond the lower bounds of 2 standard deviations on records I have going back 30 years. I don't consider this a buy signal though given the...

JohnKicklighter

The Brazilian Real posted its biggest rally since November 2008 Thursday on threats by the country's monetary authority that it may intervene in the FX market to curb its dive. Can the group offset an underlying market current of risk aversion? Or, can the Real's move signal a reversal for the broader Emerging Markets? Unlikely on both accounts.

JohnKicklighter

The last time we had the Emerging Markets panic over the Fed's first foray into pulling back support, the Taper Tantrum sent EM markets diving. However, when the Taper itself occurred, the markets were generally calm...

JohnKicklighter

The Yen crosses represent one of the FX market's most prominent risk-focused opportunities. Like chasing higher returns in dividend stocks or high-yield fixed income, the carry trade this represents is a well-known strategy. Among these crosses, few offer the consistent risk focus that USDJPY carries. Here we have the 20-day correlation coefficient for USDJPY vs...

JohnKicklighter

Some seem to believe that the Fed's delay isn't having an impact on the market while others seem to think a collapse is just around the corner. The delay has had an impact as we can see here. As expectations for a hike through year-end drop, the USDollar has plateaued. But it is still one of only two major central banks talking about hikes, while others are...

JohnKicklighter

While my Risk-Reward Index is a little more global in perspective (an aggregate of G10 10-year government bond yields divided by FX volatility), this offers a similar evaluation of the market. The 10-year Treasury yield is a baseline for 'regular' returns in the market while the VIX is a popular 'risk' measure. Combined, they see what level of return we should...

JohnKicklighter

Here we have the Dollar's performance versus the majors after the FOMC announced its hold on interest rates. The initial tumble was felt across the board, but we have since seen a considerable rebound. The exception is the Chinese Yuan/Renminbi. This has been a focus of the market's and Fed's concerns. Is the market seeing global policy actions taken that will...