SAME OLD SONG - Sorry to be a bore with this one but I am still looking to sell USDJPY and am waiting for that opportunity to present. Overall, the price action is making sense right now as the technicals and fundamentals are both supportive of this latest run in the US Dollar. However, as I've already highlighted many times, I believe the next reversal in stocks will inspire outperformance in the Yen as it holds with traditional correlations and absorbs most of the flight to safety flow. Again, the Yen is a funding currency and not a safe haven currency, which is why I believe at some point, there will be a situation where risk is off and the Yen starts to decline. But for the time being, the Yen could outperform and I believe a USDJPY move back down below 107.00 is possible.
CURRENT POSITIONS - As far as current positioning goes, our long USDCAD is moving along nicely and hopefully building some momentum. I'm looking for an initial move back to some resistance around 1.2780, though I believe we could easily get back above 1.3000. Canadian data has been a nightmare since the Bank of Canada made the mistake of raising rates last month and Stephen Poloz has since reconsidered his stance. And all of this comes at a time when the US Dollar is performing well and has a lot going for it, including Fed policy, strong data and the reflation trade. There is one more trade out there that could be materializing and that I have my eye on.
YELLOW METAL - If we look at the GOLD chart, the metal has come under a lot of pressure over the past several days. But if we pull it back some more, it's also clear that this market has been exceptionally well supported on dips in recent months and has been doing a lot of sharp pullbacks before recovering again. And so, this latest reversal should be no different and the market is expected to put in a higher low somewhere around the 1250 area ahead of the next major upside extension through the current 2017 high and towards a retest of the 2016 peak at 1375 further up. Once again, if risk comes off, this price action will have a bigger impact on GOLD than the US Dollar impact. That is to say, GOLD will be more supported on risk off than offered on a higher US Dollar.