EASY THERE FELLA - In Monday's commentary, I highlighted the stubborn nature of US equities and the market's inability to respond to an anticipated shift in Fed policy, as we had been seeing in currencies and commodities. Interestingly enough, we saw a bit of selling in stocks on Monday, although it wasn't anything even close to get excited about. Dips in US equities have been bought back like nothing I have seen in my career, and it would be silly to expect anything less right now. At the same time, this market should be due for a correction off record highs and an SPX 500 break and daily close below 1978 would do a good job of solidifying these prospects. But as close as we may be to that objective, we are also miles away, as this market has been a big tease for bears.
STILL NO TAKERS - Moving on, some other interesting things I have noticed in Monday trade. Despite the pullback in stocks, the Yen hasn't really been interested in participating, with no real demand despite and exodus from higher yielding currency plays. Once again, the Yen is by no means a safe haven bet, but at the same time, the currency still stands to benefit in risk off environments as higher yielding plays are liquidated back into the Yen funding currency. USD/JPY technical studies are through the roof, and weakness in risk assets on Monday would have been a great excuse to trigger a needed correction in USD/JPY. But it wasn't to be and the market retained a decent bid tone. But I am still looking for that pullback in USD/JPY over the coming sessions.
WACKY KIWI - The other market of interest to me on Monday was the New Zealand Dollar. The New Zealand Dollar is the highest yielding major currency, and yet, was only off slightly on the day, despite the risk off trade. I would also question the legitimacy of this price action and have been specifically taken with the reaction in AUD/NZD, which has been under pressure for many days now. In my view, Kiwi should be more exposed in this type of environment, and the currency should be even more vulnerable this week ahead of what should be some downgraded milk payment forecasts from dairy giant Fonterra. Overall, I have some short exposure in USD/JPY and will be watching AUD/NZD in the sessions ahead. No trade just yet but keeping a close eye on this one now.