At least I was not the only to get hit by nonsense 
15:50Today's market action is best viewed through the lens of position adjustments as long JPY-cross positions were cut and short USD/Europe positions were also reduced. The market action has been highly counterintuitive all week long, and today's moves are no different. Yesterday's Fed statement, taken as hawkish by bonds and the dollar, also produced a rally in equities, which was perplexing at the time. Today's equity sell-off, compounded by weak ICSC retail sales data, appears to be the more correct result, which then begs the question, why buy the dollar when the US outlook and equity markets are showing signs of weakening again? Which brings us back to position adjustments as the primary driver of the dollar's new found luster as opposed to any meaningful change in the USD outlook. Looking ahead to tomorrow, the advance retail sales report is likely to be the highlight, and if the ICSC retail sales data released today is any indication, the number should disappoint to the downside. Be aware that the ex-auto retail sales number is likely to be positive, but this will be due to higher gasoline pump prices. The real retail sales number to watch is the retail sales ex-autos and gasoline, which is what I expect to be negative. This should see the dollar weaken against Europe and see a return to JPY-cross buying, keeping USD/JPY supported above 119.50.
The monkey in the wrench tomorrow is the G7/8 briefing slated for 0930GMT/0530EDT by German officials deMaziere and Pfaffenbach. It seems highly unlikely that the JPY made the agenda, given the lack of US and Japanese opposition to JPY weakness, but we'll just have to wait to find out. If the briefing passes with no mention of the JPY, it's another green light to sell JPY.
Yesterday I cautioned about the possibility of an equity meltdown in China, when what we got was a US equity sell-off, which actually increases the likelihood of a Chinese drop. Also, the FT covered on page one the booming Chinese stock market and media coverage like that frequently presages a top in a market. Keep an eye on Asian equities again tonight, and if they implode, position liquidations will continue, sending JPY-crosses lower as speculative money flees for safety.--BD
15:50Today's market action is best viewed through the lens of position adjustments as long JPY-cross positions were cut and short USD/Europe positions were also reduced. The market action has been highly counterintuitive all week long, and today's moves are no different. Yesterday's Fed statement, taken as hawkish by bonds and the dollar, also produced a rally in equities, which was perplexing at the time. Today's equity sell-off, compounded by weak ICSC retail sales data, appears to be the more correct result, which then begs the question, why buy the dollar when the US outlook and equity markets are showing signs of weakening again? Which brings us back to position adjustments as the primary driver of the dollar's new found luster as opposed to any meaningful change in the USD outlook. Looking ahead to tomorrow, the advance retail sales report is likely to be the highlight, and if the ICSC retail sales data released today is any indication, the number should disappoint to the downside. Be aware that the ex-auto retail sales number is likely to be positive, but this will be due to higher gasoline pump prices. The real retail sales number to watch is the retail sales ex-autos and gasoline, which is what I expect to be negative. This should see the dollar weaken against Europe and see a return to JPY-cross buying, keeping USD/JPY supported above 119.50.
The monkey in the wrench tomorrow is the G7/8 briefing slated for 0930GMT/0530EDT by German officials deMaziere and Pfaffenbach. It seems highly unlikely that the JPY made the agenda, given the lack of US and Japanese opposition to JPY weakness, but we'll just have to wait to find out. If the briefing passes with no mention of the JPY, it's another green light to sell JPY.
Yesterday I cautioned about the possibility of an equity meltdown in China, when what we got was a US equity sell-off, which actually increases the likelihood of a Chinese drop. Also, the FT covered on page one the booming Chinese stock market and media coverage like that frequently presages a top in a market. Keep an eye on Asian equities again tonight, and if they implode, position liquidations will continue, sending JPY-crosses lower as speculative money flees for safety.--BD
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