Yen May Gain as S&P 500 Turns Lower with Growth Fears in Focus

The Australian, Canadian and New Zealand Dollars fell as risk appetite soured in Asia Pacific trade. The sentiment-geared commodity bloc currencies fell alongside regional shares. A discrete catalyst for the move was not apparent. Perhaps the passing of the week’s most eye-catching event risk may have triggered a return to focus on the macro backdrop, which looks increasingly alarming.

YEN, US DOLLAR MAY RISE AS GLOBAL MARKETS TURN DEFENSIVE

A quiet offering on the economic calendar in European hours may open the door for more of the same in the hours ahead. A handful of scheduled speeches from Fed officials, as well as the US PPI report, seem unlikely to derail momentum when North America joins the fray. Traders may find little in the way of fresh fodder here after yesterday’s release of March FOMC meeting minutes and CPI data.

Stock index futures tracking major European and US benchmarks are pointing tellingly lower ahead of the opening bell, bolstering the case for a risk-off result. That may put a premium on the unrivaled liquidity offered by the US Dollar as well as encourage the unwinding of carrying traders funded in terms of the perennially low-yielding Japanese Yen, sending both currencies upward.

CHART OF THE DAY – NEAR-TERM S&P 500 CHART HINTS AT RISK-OFF BIAS

Technical cues warning of topping in the bellwether S&P 500 index – a proxy for broad-based market sentiment trends – remain intact. Zooming in to the four-hour chart confers a sense of urgency. Prices have already broken the bounds of the latest upswing from late-March lows, hinting that at least a downswing within the developing Rising Wedge pattern is due. If its lower boundary is subsequently breached, a longer-term risk-off move is likely. Negative RSI divergence bolsters the case for a downturn.