NEWS / Foreign Exchange

'Low-Yielding' Yet Again (Revisited)

On April 4 I was noting here:

'I continue to believe that there are technical as well as fundamental clues suggesting the short-lived panic seen several weeks ago in the Yen as well as major stock markets from both sides of the Atlantic only heralded what in the future may come as a far more ample movement - one counter to already well-established, multi-year global trends. However, as I wrote recently, my leading opinions do not count as much as certain price configurations do.

I have a feeling that when the Yen starts appreciating again just out of the blue, the major stock markets will record a solid downmove.'

China's stocks fell from record highs today, after consistent price gains having been made recently - the downfall came apparently on concern the interest rates may rise in China (so we are learning that if Japan's monetary policy can be ridiculized, we can blame it on China instead). Major stock indices from both sides of the Atlantic took a dive as well. The Yen and the Swiss Franc initially went up. Gold went down.

Sounds familiar? We just received yet another sign of how apprehensive the global markets are nowadays about the possibility of a massive carry trade liquidation. A sign of how strongly correlated the global markets can become in an instant. A sign of a very specific configuration of the global markets which goes far beyond Technical Analysis 101, heralding opportunistic plays for the globally diversified trader.

In my view, however, the last hours might have been yet another 'crying wolf' sequence. I do not perceive the existence of a notable bottom of the Yen via its crosses, nor do I recognize a remarkable top of the main stock market indices from both sides of the Atlantic having already occured.
Multiple corrections tend to erode the power of a trend, and remarkable market movements are exceptions often preceded by 'crying wolf' sequences. I know I will stay actively concerned about the future developments, forex as well as non-forex wise.