Markets are going bananas again. The syntactic ambiguity of the moment shouldn’t be lost as computer algos mix badly with geopolitical news. Volatility has rebounded despite modest hope from markets, writes Bob Savage. He's presenting at TradersExpo New York March 11.
The main story overnight happened just at the close yesterday – Apple (AAPL) cut its sales forecasts for 1Q due to slowing iPhone sales in China – there are other fruits to consider overnight that matter. Stocks had an immediately negative reaction with a “flash crash” in the U.S. dollar/Japanese yen (USD/JPY) and other safe-havens bid up accordingly.
China economic fears remain central to trading so far with Danish shipper Maersk shutting its container factory there. The Chinese countered some of the gloom over their economy by landing a probe on the dark side of the moon – moving up the race for space dominance in 2019.
The threats Wednesday from North Korea on changing the approach to denuclearization matter to China/U.S. relations as well – and the disappearance of a North Korean diplomat in Italy makes it a European affair as well.
The problem with using USD/JPY as the guide to trading other markets is liquidity. Japan is on holiday, the BOJ isn’t going to act on forex unless asked and the debt situation of Japan make safe-haven status less meaningful.
The USD may be the other side of the trade to consider today with the U.S. government shutdown far from over, with Fed hikes for 2019 all but priced out and with the rest of the world looking like a value play, the USD is the barometer with 95.90 opening up the risk for 91.50 again.
A weaker USD is the Trump and perhaps Powell dream as it will help bring some punch back to the US economy.
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