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Forex: USDJPY Has More to Gain than S&P 500 in Debt Deal

By , Chief Currency Strategist
12 October 2013 03:00 GMT

Talking Points:

• Traders will monitor the weekend headlines as expectations for a US debt deal have swelled

• A rebound in stocks and risk trends may warp the reaction to any resolutions found

• There are a lot of moving parts next week, trade opportunities for every scenario

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A massive, 57-point rally for the S&P 500 through the second half of this past week has turned the tides of risk and set expectations quite high. The White House and Congressional leaders are expected to continue their negotiations over the US debt limit and government shutdown over the weekend. Given the swell in risk trends and drop in volatility measures, it was clear that market participants expect a deal will be struck. Yet, how much further can the market rally on what is likely to amount to a delay? Furthermore, would averting disaster necessarily signal a new bull phase for risk taking? There are short-term and long-term implications to the US budget standoff, and plenty of additional event risk that needs to be incorporated (including a 3Q China GDP report, key UK data and a lurking NFPs). We streamline the risks and market's biases in this weekend video.

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12 October 2013 03:00 GMT