If these crack, it could get ugly
CAD/JPY
Through Q2, this was the best trade in the FX market but it’s not so pretty right now.
There’s a major head-and-shoulders on this chart and as I write this, it’s breaking through the neckline, which is also a double bottom.
This chart is almost too textbook but it’s not pretty. The measured target is about 80.00 and at the pace we’ve gone in the past 8 trading days, it won’t take long to get there.
Copper
Just like in real life, the doctor is worried.
The health of the global economy depends on the health of every one of us. Given the number of breakthrough covid cases due to delta and scrambled announcement of booster shots in the US, the trends aren’t promising.
But you don’t need me to tell you that, doctor copper is flashing the same. A single chart like CAD/JPY can sometimes send a misleading signal but when another economic-bellwhether like copper does the same, it’s best to listen.
What it means?
Counter to the charts, I think we’re going to get past delta. Highly vaccinated places are seeing a reversal in cases and even in hard hit parts of the US, there’s a loss of momentum. Vaccine rollouts around the world are progressing rapidly and I suspect this will be the last big gasp of covid, even it it means we have to get booster shots for years.
That said, these charts are ugly and there’s no reason to fight them now. A washout could very well be what it takes to send the Fed back to neutral, coalesce Democrats around another stimulus bill and get China to ease.
I think the trade is to buy the drop eventually but it may get very ugly first.