The USD/JPY hit a new 6 year high overnight/this morning at $107.14, then gave a large chunk back and popped again around 9 a.m.
One of the interesting things is that yields which have recently been pegged to the USD/JPY started to separate...
Earlier the 10 year Yield did spike through its 50 and 100 day moving averages hitting 2.514, currently (at last look) at 2.525
Treasuries did gain for the first day of the last 6 on concerns the F_E_D is going to signal rate hikes sooner than the market expects. This fits well with out recent analysis of the last 2-days showing that it looks like the TLT pullback we called late last month is possibly ending according to 3C signals and is higher on the cash open. We'll take a closer look at that with the F_O_M_C coming up next week.
I think rather than chasing all of this craziness around right now, I'll let it settle and check in on it later.
The GBP is seeing some strengthening overnight as some polls suggest the Thursday Scottish referendum for independence is losing momentum with the "Better Together" campaign gaining ground. The RBS has said if Scotland breaks away they will relocate to England as have some other large Scottish banks.
The near term question is how much impact this will have on the $USD as GBP weakness along with AUD and JPY has sent the $USD to 15 month highs recently.
The referendum in Scotland on Thursday is also causing noise in the Catalonia region of Spain that has been seeking independence for some time, however while the Scottish vote is legal, the Spanish government has said any such vote in the Catalonia region would be illegal, still there are some large scale demonstrations and lots of talk out of the region. One or even two break-away republics in the Euro-zone would present some interesting challenges, especially with regard to sovereign bonds, but we'll leave that for when we cross that bridge for now.
US Initial Claims this morning saw the second miss in a row coming just after last Friday's ugly Non-Farm Payrolls data and the initial reaction seemed to be "bad news is bad news" which is a little strange in front of the F_O_M_C, however on the open the market popped a bit reversing some of the overnight losses.
The Claims print of 315k is the highest since June and on an adjusted and non-adjusted basis, Claims are higher Y.O.Y.. The much watched 4 week moving average has risen 4 of the last 5 weeks potentially signaling a change in trend, the government will have to get busy kicking people off unemployment benefits and reduce that labor force participation rate so we can keep the unemployment rate at 6.1%. Seeing some friends who have recently lost their jobs trying to file for unemployment, I can tell you the government at least in my state has made it nearly impossible for even a smart person with a computer to get through the process.
I will be very interested in what FX and Yield/Index futures' correlations look like at the end of the day, but overnight it almost seems as if Citadel got some new instructions on the programming of their algo correlations.
Tuesday's Dominant P/V theme as well as breadth showed an easy 1-dday oversold event and the market closed green yesterday on that. Yesterday however this all moderated with the Dominant theme being Price Up/ Volume Down which is the most bearish of the 4 possibilities, it's not a strong next day mover like the very strong breadth weakness from Tuesday with 9 of 9 S&P sectors red and only 17 of 239 Morningstar groups green. Yesterday we had 5 of 9 green and a more normal 163 of 239 Morningstar groups green. Breadth didn't improve AT ALL yesterday, not surprising with the dominant P/V at close Up/ Volume Down.
So far most of the market is in line with price action off the open, not the best looking open. More to follow...
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