From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley
There’s been a subtle risk-on tone in recent weeks. With each passing day, it’s been spreading to more and more markets and charts.
Rates are rising around the globe. The underlying uptrend in commodities is intact and looks ready for another up leg. Our equal-weight commodity index is resolving higher from its current range. And cyclical stocks such as energy and financials are breaking out to new highs.
All of these events speak to a growing risk appetite and support higher prices for risk assets.
Although, two areas where we aren’t seeing such clear evidence that risk-seeking behavior is re-entering the market would be currencies and our intermarket ratios.
The AUD/JPY cross is still stuck within a range. High-yield bonds $HYG relative to their safer alternatives — US Treasuries $IEI — failed to hold their recent highs. And the copper/gold ratio is a hot mess.
We would expect to see decisive upside resolutions from these charts if investors are positioning for another leg higher.
This is not the case. At least, not yet.
But there is one forex cross that is hinting at higher prices for equities — specifically Japanese equities. That’s the USD/JPY.