From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley

In recent weeks, the market has taken a risk-off tone as dollar-denominated risk assets have come under increasing pressure. 

Major US stock indexes have pulled back, and procyclical commodities such as crude oil and copper continue to chop around beneath overhead supply. 

Interestingly, we haven’t seen much of a bid in defensive assets through the recent bout of downside volatility. US treasuries have been relatively quiet, and the dollar remains below its August highs. Meanwhile, bond-proxy sectors like Utilities and Staples continue to make new relative lows. 

None of this suggests the kind of defensive positioning that would be typical in an environment where risk assets are getting hit. 

But what about one of the most significant safe-haven assets of all... the Yen?

Let’s take a look at how the Japanese Yen is setting up against other major currencies right now and what it could mean for the market at large.

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

Last night we held our September Monthly Conference Call, which Premium Members can access and rewatch here.

In this post, we’ll do our best to summarize it by highlighting five of the most important charts and/or themes we covered, along with commentary on each.

Let’s get right into it!

From the desk of Steve Strazza @sstrazza 

Welcome to our latest RPP Report, where we publish return tables for various asset classes and categories, along with commentary on each.

Looking at the past helps put the future into context. In this post, we review the absolute and relative trends at play and preview some of the things we’re watching to profit in the weeks and months ahead.

We consider this our weekly state of the union address, as we break down and reiterate both our tactical and structural outlook on various asset classes and discuss the most important themes and developments currently playing out in markets all around the world.

In our RPP Report from the end of August, we discussed how the weakest areas were registering failed breakdowns and digging in at support.

From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley

The US Dollar has been trapped in a sideways trading range for the trailing 12 months now. The primary trend is lower, and we continue to see near-term weakness from the DXY Index as well as most USD crosses.

Commodity-centric currencies have been some of the best performers versus the Dollar since early last year, although most of them have been correcting since Q1 or Q2, giving back a good deal of their earlier gains.

So, will we see a resurgence back to those risk-on pairs, or will they keep sliding lower against the Dollar?

Today, we’re going to focus specifically on the currencies of some of the largest oil-producing countries in the world.

This should give us information not just about currency markets, but also commodities and risk assets in general. 

Let’s talk about it.

An easy way to aggregate and measure their performance as a group is by analyzing our Petrocurrency Index. It includes currencies like the Canadian Dollar $CAD, the Russian Ruble $RUB, and the Brazilian Real $BRL, among others.

From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley

In last week’s Currency Report, we highlighted the NZD/USD cross as a means to express our bearish US dollar thesis.

The setup was too good to resist taking a swing at following the recently failed breakdown. And so far, we’ve been rewarded for it. That’s information.

But it’s not the only cross that continues to trend well against the US Dollar. We see it all over, and it’s only reinforcing our bearish thesis.

As such, we want to look for more opportunities to take advantage of this developing theme.

In this week’s post, we’re going to do just that.

Let’s drill into our forex universe now and identify some of our favorite risk/reward setups we want to bet on to capture profits from a weakening US dollar. 

From the desk of Steve Strazza @sstrazza and Louis Sykes @haumicharts

Welcome to our latest RPP Report, where we publish return tables for various asset classes and categories, along with commentary on each.

Looking at the past helps put the future into context. In this post, we review the absolute and relative trends at play and preview some of the things we’re watching to profit in the weeks and months ahead.

We consider this our weekly state of the union address as we break down and reiterate both our tactical and structural outlook on various asset classes and discuss the most important themes and developments currently playing out in markets all around the world.

In our last report, we discussed all the whipsaws we had been witnessing in recent weeks and noted that the next major piece of information would be the velocity of the reactions these charts made in the opposite direction.

From the desk of Steven Strazza @Sstrazza and Ian Culley @IanCulley

Two months ago, we laid out plans to position ourselves for a push higher in the USD.

Of the four trade setups we identified--EUR/USD, GBP/USD, AUD/USD, and NZD/USD--the Aussie was the only one that worked. 

The fact that many of those trades failed or, more specifically, were never even triggered at all, is information!

Fast forward to today and we're looking at a failed breakout in the US Dollar Index that's been confirmed by strong downside follow-through since last week. Now, it’s time to flip the book long on some of these trades to express our thesis of further USD weakness, at least over the near term.

One trade setup that stands out due to its asymmetric risk-reward profile at current levels is the NZD/USD.

Let’s take a look at the Kiwi...

Here’s the daily chart of the NZD/USD cross:

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

The market has been a choppy mess for months. 

Unless you’ve been stuck under a rock or at the beach all summer, this is old news. And we’ve admittedly been a bit obnoxious when it comes to rehashing this theme. But usually when we find ourselves harping on something, it's because it's a big deal.

Our own behavior can be fantastic information, and it's become a part of our process to pay special attention whenever we begin to repeat ourselves a lot.

This week is no different, as the US Dollar Index $DXY provides another example of the market’s sloppy state of affairs.

Just when we thought we might finally have some decisive price action in the Dollar, Friday’s attempted breakout followed by Monday’s weakness is casting some serious doubts.

Was last week’s breakout above the March pivot highs valid?

Or was it just another failed move to add to the market’s growing list of whipsaws and fake-outs?

From the desk of Steve Strazza @sstrazza

Welcome to our latest RPP Report, where we publish return tables for various asset classes and categories, along with commentary on each.

Looking at the past helps put the future into context. In this post, we review the absolute and relative trends at play and preview some of the things we’re watching to profit in the weeks and months ahead.

We consider this our weekly state of the union address as we break down and reiterate both our tactical and structural outlook on various asset classes and discuss the most important themes and developments currently playing out in markets all around the world.

In our last report, we pounded the table on our position that markets are a total mess these days. Another theme we hit on was how many significant risk assets were trading at or below critical levels of overhead supply.

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

The US Dollar Index $DXY has been our main focus as it nears the upper boundary of its recent range.

Where the USD heads next will have wide-ranging implications across asset classes by either providing a tailwind for risk assets or a headwind in the case it resolves higher from its year-to-date range.

But, as the market continues to chop sideways, we want to direct our attention to one of the most important risk gauges in the currency market.

That’s the Aussie-Yen.

In this week’s post, let’s check in on the AUD/JPY to see what information we can glean regarding risk appetite and what it could mean for other markets.

Let’s dive in.

First, we have a daily chart of the AUD/JPY:

From the desk of Steve Strazza @sstrazza

Welcome to our latest RPP Report, where we publish return tables for a variety of different asset classes and categories along with commentary on each.

Looking at the past helps put the future into context. In this post, we review the absolute and relative trends at play and preview some of the things we’re watching to profit in the weeks and months ahead.

We consider this our weekly state of the union address as we break down and reiterate both our tactical and structural outlook on various asset classes and discuss the most important themes and developments currently playing out in markets all around the world.