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“The road to Easy Street goes through the sewer.” – John Madden

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Investors have taken an optimistic tone this morning heading into the release of March CPI, but that could all change in a big way based on the report.  The last several weeks have seen increased concern that inflation will be stickier than previously thought. While the market remains near all-time highs, most investors would say a higher-than-expected report is more likely than a weaker-than-expected one.

The recent breakout in gold and other commodities we discussed yesterday is one reason for investors to position for a higher-than-expected report. After years of stalling below resistance, gold finally broke out in early March and has ripped higher ever since.

While it hasn’t been stuck below resistance for nearly as long as gold, the yen has been simmering in a historically tight trading range just below 152. It first tested the 152-level late last year before rallying sharply into the new year (shown as a falling line in the chart). That rally quickly fizzled, and it wasn’t long before it was back to the low 150s range.

Over the last 15 trading days, the daily settlement price for the yen relative to the dollar has been confined to a 0.33% range, the narrowest since the late 1970s! The intraday chart below shows how the yen weakened to just below 152 in late March and has flatlined there ever since.  In the last few days, it has inched closer to that critical level but keeps coming up short. At this point, it seems like only a question of when the yen will break through 152.  After that will the move be as dramatic as gold’s move over the last month, or will it fail to live up to expectations?

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