This recovery in risk has a remarkable ability to pull ever higher. The US has now faced a week of protests and rioting, and yet Wall Street continues to rally. Whilst the riots could still be an issue (if they continue for much longer), right now it seems to be secondary as an issue.
Investors and traders of risk assets are focused far more on the massive monetary and fiscal support, re-openings from lockdown and potential economic recovery. Reports that China was potentially breaching its Phase One trade agreement obligations seem to have been wide of the mark (at least they have been officially denied) and so the risk rally has been released once more. This has been driven further overnight with the China Caixin services PMI ,which have climbed to 55.0 and shows an expansion level of almost decade highs. This all continues to fuel the recovery in equities, which bounds on this morning. Even Treasury yields (which have seen volatility dampened by the actions of the Fed) are ticking higher.
The outlook on forex is decisively risk positive, with the Aussie and Kiwi again pushing higher today (with overextended moves), whilst the dollar and the yen (both seen as key safe haven plays) are underperforming badly. This relentless run in risk appetite is also hampering the move higher on gold too, which is down in recent days despite the dollar weakness. The services PMIs will give an indication of how the major western economies are faring today. With the ECB also expected to add to its own support programme tomorrow, this risk rally looks set to continue.
After going silent for 3 weeks, USDJPY finally broke to the upside. Today’s close is actually right near the year open (year open is 108.76). Near term focus is 109.38/53 (April high and 61.8% retrace of decline from the March high). Support should be the high volume level from today at 108.30.