Currency crisis or not, Tokyo is willing to defend the yen in the open market. It's proven this multiple times over the past three years, and today’s FOMC-related volatility will likely test its resolve.
Considering previous yen-buying interventions, the dollar, interest rates, and the dollar-yen pair could be headed lower in the coming months.
Before we dive into the yen, here's a quick update on the action in the euro and pound.
The euro retested its breakdown level from earlier this month, forming a bear flag:
A close below 1.06 completes the flag pattern and sets a rough downside objective of 1.0450.
It might sound silly as the widow-maker is falling back toward its mid-1990s lows.
But this is a logical level to witness a sustained rally. Especially when you consider previous cycles and where Natural Gas is trading relative to crude…
Earlier this week, JC mentioned the crude oil vs. natural gas ratio during an internal strategy session.
He tracked this relationship when he day-traded natty gas, using it as a mean reversion indicator.
Fast-forward to today, and the crude-to-natural-gas ratio is retreating from its highest level in more than a decade.
The last time the ratio hit these levels, natural gas futures ripped 225% in less than two years.
Commodities are outperforming stocks and bonds. Interest rates are rising worldwide, and investors are anticipating increased inflationary pressures—not multiple rate cuts—this year.
In fact, inflation expectations are reaching levels not seen since June 2022…
Check out the Treasury Inflation-Protected Securities ETF $TIP vs. the nominal US Treasury Bond ETF $IEF ratio zoomed out twenty years:
Monster base. But I don’t think of this ratio in those terms. Instead, I use it to gauge investors’ desire for inflation protection.
