One of the most remarkable aspects of modern finance is the ability of markets to sniff out changes in the prevailing winds and subsequently repricing assets in very rapid fashion. What we have seen in recent weeks though is a return to the old days when trend changes took time to unfold. What we have been seeing for the last six or eight weeks is an old-fashioned slow-speed car wreck. Flight from emerging markets, commodities and carry trade continues long past the point where one would have expected the market to purge its excesses.
The market’s risk barometer, EUR/JPY is in panic mode, not surprising with major banks and investment houses circling the drain on Wall Street today. Now at 147.75, the cross eyes the 143.00/145.00 area in the weeks ahead.