I'm used to a market where stocks struggle when the US Dollar are US rates are rising. And that's what we've seen all year.
And while the data certainly points to a market of stocks that have been grinding mostly sideways over the past few months, stocks haven't done nearly as bad as you'd think, considering just how strong the Dollar has been and how much rates have risen.
So the question for me is whether these consolidations are going to resolve higher or lower?
And what the implications might be....
A lower resolution here could be a massive tailwind for stocks.
Remember, during Election years, the market tends to bottom in May ahead of a very strong summer, particularly when there is an incumbent candidate.
If these resolutions are, in fact, to the downside, then that's exactly what I would expect to see happen:
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.
Check out the XXXL lower shadow in the Mexican peso futures (denominated in USD):
Last Friday’s intraday swing spanned six percent and registered the highest single-day ATR reading since March 2020.
Despite the earth-shattering volatility, the bulls prevailed. That’s the critical lesson from last week’s action: The bulls immediately repaired the damage.