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S&P 500 Break Escalates Risk Aversion, USD/JPY Plunge True Harbinger

S&P 500 Break Escalates Risk Aversion, USD/JPY Plunge True Harbinger

John Kicklighter, Chief Strategist

The market's 'Fed Taper' withdrawal has progressed the sense of risk aversion in the capital markets. Joining the dollar's impressive rally, the S&P 500 marked a critical break of the backbone to this year's bull trend at 1,300. Yet, despite the progress made on these sentiment measures; the durability of a market-wide effort of deleveraging of risky assets remains vulnerable to complacency and speculative correction. Pure momentum in the flight from exposed and richly priced markets is the best fundamental support to continued risk aversion; but the signals for such an escalation are very specific: a tumble in yen crosses and swell in demand for US Treasuries. We discuss these fundamental aspects and the trade opportunities they present in today's video.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.