Matters can change pretty quickly across capital markets. Just last week, much of the world was sure that Hillary Clinton would be the next President of the United States. By early evening, around 7-8 PM, the realization that this might not be the case began to set-in for markets, and what initially looked like the start of another bout of risk aversion turned into one of the strongest rallies of recent memory.
But with stocks and the U.S. Dollar both perched near resistance after enjoying a week of the ‘Trump Bump,’ the euphoria of the post-Election rally appears to be quieting and attention is now moving back on to global market’s favorite focal point: The Federal Reserve.
With a slew of Fed speakers set to offer commentary this week, we can certainly see themes shift as volatility continues. And while we’re probably not looking at a full-scale reversal in both USD and U.S. equities, we’re likely looking at some semblance of correction for one or the other. For this morning’s Market Talk, we’re looking at three large macro markets with interesting long-term setups ‘in play’ at the moment, made more interesting by last week’s price action.
The Yen
One of the biggest beneficiaries of this recent boost-higher in the Greenback has been the Japanese Yen. USD/JPY has had some of the cleanest trends over the past four years; first as Yen-weakness from 2012-2015 on the back of ‘Abe-nomics,’ and then aggressive Yen strength as Abe-nomics came undone and the Bank of Japan struggled to find their next ‘pivot’ in monetary policy stimulus.
The tough part about trading the Yen over the past four years have been the transition periods in which the trend congests before staging its next ‘big move,’ and for much of the summer USD/JPY grinded around the 100-level on the pair. And after the out-sized rip in the Greenback with the post-Election backdrop, the pair has broken up to fresh five-month highs, opening the door for the start of another trend-higher in the pair.
