Thursday update…Risk and USD off

  • Another poor day yesterday for equities has fed through to USD weakness  and yes JPY strength. The JPY safe haven trick is still alive and well helping USD/JPY down to 118.32 overnight.
  • Its not been a universal move for currencies and GBP has stuck in the wooden spoon spot still unable to make any headway against the USD and continuing to 13×13 bounce house lose ground against the EUR ( 0.7375 ) and now the JPY ( 177.25 ).
  • The USD move still seems corrective sparked by a change in the perception of the Fed’s timing for a hike in rates. I think as I have said the EUR  parity calls were just a little premature and weighty EUR/USD shorts are being squeezed out.
  • What I cant quite understand is that markets continue to ignore the possibility of a Grexit. Surely next weeks presentation by the Greek government of their latest reforms will be the last effort at reconciling differences. It is clear that Athens will run out of cash any time soon with banks still seeing an exodus of funds as Greek depositors vote with their feet.
  • The Stock sell-off may just be an aberration likewise the USD . However, it may not be over yet and some further squeeze of USD bulls is quite possible.
Market summary
  • Forex. USD/JPY 118.40 has led the way having broken resistance at 118.65/70 . That trend down though will likely depend on risk appetite and any bounce back in equities will surely see us back above. However, much with EUR/USD ( 1.1028) its about squeezing USD bulls. EUR/USD might even make it to 1.15 if we get a Greek settlement next week. The downside on a failure is maybe even bigger though. GBP ( 1.4965 ) continues to lag as its European safe haven status is disappearing fast under political worries. AUD ( 0.7877 ) and CAD ( 1.2418 ) are lagging the rally but not Gold up at $1212 . Technically the USD remains in its uptrend but closing in on some big levels.
  • Equities.. I’m never sure why stocks go up or down these days. What is good news or bad ? Yesterday commodities and oil were up , data was worse all might just have been used to explain a rally. On past form the weakness will not last unless some major catalyst appears.
  • Bonds..US 10 YR. at 1.90 so yields just a fraction lower but no real move down yet. The Fed told us to watch the data but it may be its employment numbers that will really determine the direction.

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