Kruger Insights Tuesday – November 19, 2013 by FirstMacro

BinaryOptionsNow | Published on November 19, 2013 at 11:35 am

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Francly Speaking – While many had initially discounted Yen strength on Monday as being driven off broader USD weakness, it seemed to me the price action was disconnected from the Dollar move and possibly more a warning sign of a potential reversal in risk assets. Sure enough, this all came to fruition into the close, with the Yen remaining well bid, while the rest of the currency market came back under pressure against the buck. So what was it that had me thinking differently? Well – it wasn’t exclusively the price action in USD/JPY. It was a combination of some renewed Yen demand in conjunction with a pressured EUR/CHF market. Although the Franc has taken a bit of a back seat in recent months, on account of the lack of volatility and well publicized SNB intervention, we must not forget the direction in this cross rate can still be used as a formidable risk barometer, particularly when being confirmed by the Yen. Though I do not subscribe to any theory that advocates sustained Yen demand from here, there is a very real possibility the currency manages to find decent short-term interest on traditional correlations. For now, I would consider the possibility of a USD/JPY pullback into the 97.00’s and EUR/CHF decline below key support at 1.2215.

kruger insights november 19, 2013

Classic Textbook – Moving on, perhaps the most significant development on Monday, was the bearish reversal in US equities. At this point it would be extremely premature to call for a top, but at the same time, the bearish outside day formation in the daily S&P chart, after the market posted a fresh record high around a major psychological barrier, should at least by textbook standards, open the door for additional weakness over the coming days. Fundamentally, it seems Carl Icahn is getting credit for the reversal, after warning the stock market could easily have a “big drop.” But the reality is that a very healthy corrective adjustment in equity markets is long overdue. The jury is still out on whether this actualizes just yet, but I am really not sure how the market can retain such a bid tone with every ounce of dovishness seemingly already priced in. We are then left with a slowly recovering economy, elevated unemployment and less than impressive corporate earnings, variables that would normally have a weighing influence on risk assets. For now, let’s just wait and see how it all plays out Tuesday. It has been very difficult to get any sort of pullback in equity markets, though admittedly this move does have a certain feel to it.

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