Were the Mayans right, is this the end of the world or just FX?
Markets went through quite the whipsaw price action yesterday and have since seemingly calmed down a little as the desired effect mentioned here yesterday looks to have been achieved. I mentioned year-end optionality yesterday and to that end needing certain spot prices to be trading at or close to various levels. As time progresses and stop loss orders are cleaned out it looks more and more as though the 1.3250 handle in EURUSD is the one where most interest lies. We blew out into the topside yesterday but almost as quickly have since retreated from 1.3308 highs and now trade in and around that 1.3250 area.
News overnight came mainly from both Japan and the US, where the former failed to officially announce a 2 percent inflation target, but did however pump another JPY 10 trln into expansionary monetary policy. This injection was expected (or as good as) and the ensuing price action in the market reflected this accordingly. We remain trapped in a 83.80 by 84.50 range and until we have further clarity in the new year about what the BoJ intends on doing, this will likely persist as topside exporter offers are significant.
In the US the cliff remains the hot button topic, and more claims and counter claims of resolutions being reached and/or vetoed have the market performing epileptic fits looking for something to hang its hat on. The net result however is that we are no closer today than we were perhaps a week ago and the deadline looms large, still.
The SPX and Gold have seemingly ignored the cliff issues at hand and have parted company as far as directionality is concerned. The former rages higher, while the latter looks to plumb fresh lows into the year end.
Sadly, or perhaps wisely I have nothing fresh to offer at the tail end of what has been a long and certainly tough year, instead I urge keeping helmets handy and better still avoiding this market until the new year, assuming of course that the Mayans have got it all horribly wrong...