Watching the Euro, with Risk Barometer in the Euro/Yen Today

03/06/2018 11:19 am EST


Robert Savage

Partner & CEO, CCTrack Solutions

The forex markets are watching the euro into the ECB Thursday and doubting that the Japanese yen can crack 105. The barometer for risk may be found in the euro/yen as it scratches the 200-day moving average, writes Bob Savage, CEO of Track Research Tuesday.

Trying to find leadership for macro markets is like trying to see the trees for the forest. There is a shift up again for equities even as global rates are higher with risk-on moods extending from headlines that North and South Korea plan to hold talks in “late April,” as long as regime safety is assured then denuclearization is on the table.

There is a widening imbalance to the mood between bulls and bears, with the reduction of the fear of a global trade war going down in the U.S. after Speaker of the House Ryan pushed against Trump tariffs, bulls won yesterday.

The hopes for a quick coalition build out of the ashes of the Italian election also inspires bulls today with Italian BTPs gaining back most of yesterday’s losses.

Unwinding bad news isn’t the same as good news and that is important to the reasoning for the bears. But the lesson has been learned that politics just don’t matter much to markets. So it casts doubt on any North Korea-inspired rally now.

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This leaves monetary policy in control and with 2 key FOMC speakers today, pay attention. However, the lessons from overnight cast a shadow on this fear – as the RBA warns on wage growth peaking, puts doubt on any future hike path – but the bonds sell off and Australian dollar (AUD/USD) rallies from 2-month lows.

BOJ Kuroda at confirmation hearings for his second term tried to recast his exit comments from Friday  – but JGBs went lower anyway.

There was little news in Europe other than the grind of supply in bonds leaving markets set up for another robust day in the U.S.

This leaves the forex markets watching euro still into the ECB Thursday and doubting that the Japanese yen (USD/JPY) can crack 105 – mixed that together and the barometer for risk may be found in the euro/Japanese yen (EUR/JPY) as it scratches the 200-day moving average at 131.40 and yearns for a melt-up like equities searching for the bullish trend amidst the noise. Watching 133.05 for some confirmation that we are out of the woods.

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