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Yesterday we discussed the case of whiplash that was dealt in JPY crosses on the sharp weakening of the yen after Friday’s rally. Today’s session saw another direction change, with the powerful bid in sovereign bond markets driving fresh yen resilience and dogging trend traders’ hopes for a clear direction.
Elsewhere, the NZD sagged badly overnight on a dovish broadside from the Reserve Bank of New Zealand which brings the bank’s guidance more in line with other central banks around the world. As we discus below, this takes AUDNZD suddenly close to resistance just after a long string of fresh new lows for the cycle.
As well, sentiment in EM was weak today, especially in TRY (Turkish lira) with liquidity drying up as tom/next rolls have spiked as high as 1,000% annualised (yes, one-thousand percent) today, driven by Turkish authorities punishing short TRY positions ahead of this weekend’s election. Breakout signal tracker
Our latest position, a EURAUD short promptly found a bottom and then backed up sharply as the AUD suffered collateral damage on the huge sell-off in NZD overnight on the RBNZ’s dovish turn. Whether the sell-off move can get back on track will likely rely on a further improvement in risk sentiment, and today’s developments leave us none the wiser. The losses will only pile up for breakout traders if every directional feint reverses…