Risk Weakness Starting to Show
In spite of the gain seen on equities so far today risk has started to waver in the Forex market, which creates an interesting divergence. Risk was bought up leading into Bernanke’s speech, which is a strong indication that price action will go the opposite direction in the aftermath as the short term buyers are forced to cover when price fails to follow through in their direction. It is the same idea as when a cartoon character runs off a cliff in a straight line, then looks down and sees only air.
The S&P 500 has tagged the 950 mark, and has not been able to push any higher, so a technical retracement is probably in the works. Most of the news that is supposedly driving this rally has been mixed, leading us to believe that it is more of a technical move than solid buying. We are sellers of the weaker pairs against the yen, which at the moment are EUR/JPY, GBP/JPY, and possible CHF/JPY, as the Swiss nears previous intervention levels against the dollar.
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