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Is this the beginning of the sell-off the market has been avoiding for the last several months? Equity futures are lower this morning as rates have risen and Bitcoin is getting shellacked. Making matters worse for equities this morning is a sharp sell-off in the health insurers following updated Medicare Advantage reimbursement rates published after the close yesterday. Crude oil is up 1.5% while the breakout in gold continues, and that’s not helping to make the case for rate cuts. While May has been off the table for weeks now, markets are also increasingly starting to price June out of the picture with odds now falling to not much better than a coin flip. The only economic data on the calendar this morning is Factory Orders and JOLTS which will both be released at 10 AM Eastern.
Outside of the US, the Japanese yen continues to trade at an interesting spot. After making a run to the ever-important 152 level two weeks ago, the Japanese yen has stalled over the last two weeks just shy of that resistance level. As shown in the chart below, 152 is a level where each of the prior two sell-offs in Q4 2022 and Q4 2023 were stopped in their tracks.
As a result of the stall, in each of the last ten trading days, the daily close for the yen has been rangebound between 151.26 and 151.69 for a total range of 0.28%. That’s narrow! The chart below shows the rolling 10-day high-low range of the yen’s daily closing levels dating back to 1980. It’s hard to see it in the chart, but over the last 45 years, there have only been two other periods where the 10-day range was less than 0.30% as it is on pace to do today. Since 1980, the average 10-day range is 2.28%.
In the long-term chart of the yen below, the red dots show each time the rolling 10-day change dropped below 0.30%. The first occurred in early 1986 at a time when the yen was in the middle of a monster rally that took it from over 250 yen per dollar down to under 125 in less than three years. After that, the next time the range dropped below 0.30% didn’t occur until late 2019 and then again in June 2020. Leading up to and after those occurrences, the yen was in a sideways trend and didn’t do much over the following year before the current sell-off started in earnest. It’s a small sample size, but in each of the prior two examples, the trend that was in place leading up to the narrow ten-day range remained in place after.
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