US Dollar, Japanese Yen Showing Signs of a Turn as Surge in Consumer Confidence Fails to Impress

US Dollar, Japanese Yen Showing Signs of a Turn as Surge in Consumer Confidence Fails to Impress
To say it was an interesting day in the currency markets would be an understatement. The US dollar and the Japanese yen ended as the strongest of the majors, but they were well on their way to be the weakest during the European and early US trading session. Indeed, ahead of the release of US consumer confidence, carry trades were making headway and US stock market futures were rising in anticipation of strong results. In the end, the markets were correct in anticipating better results, but wrong on the subsequent fallout. In fact, shortly after the Conference Board announced that their measure of US consumer confidence jumped to a three month high of 54.1 from a revised 47.4, US stocks started to pullback from intraday highs, and the US dollar and Japanese yen rallied. These moves may suggest that optimism has hit an extreme, and with the DXY index holding above a trendline connecting the July 2008 and August 2009 lows, and many of the JPY crosses showing signs of reversal, we may be finally nearing the return of risk aversion. That said, I was beating this drum last week and got burned as a result, so I’ll be awaiting confirmation signals (such as trendline and neckline breaks in pairs like GBPUSD, GBPJPY, and EURJPY) before taking decisive action.