The "risk" price action in the NY session was eerily similar to yesterday as stocks failed to hold on to a booming rally. The S&P closed down -0.5% at 903/904 and it looks like any break into the 915/930 area has stocks feeling a bit too expensive for now. The big news on the economic front was the release of the Fed meeting minutes. The result was a decoupling of the euro and stocks correlation witnessed early in the session. The Fed noted that larger asset purchases had been discussed and also downgraded their economic assessments for 2009 and 2010. The more negative growth outlook from the Fed sent shares lower but the potential for more aggressive quantitative easing is dilutive to the buck and thus EUR rallied despite the "risk asset" selloff.

Looking at the correlations across asset classes for May, the USD weakness has actually been less about gains in stocks and more about the rally in commodities (especially oil). The buck has moved inversely with commodities 87% of the time and with oil 96% of the time in May thus far.  The dollar's correlation with equities is a trivial -16% meanwhile. In other words, if the run-up in oil continues, expect the greenback to remain weak regardless of what stocks do. Oil inventories were also released today and showed a sharper draw than anticipated. As such, the ''tightening'' in the supply/demand imbalance in oil continues to confirm the move higher in crude prices. Should oil push upward from here, USD weakness will continue.

Gold added to the USD-negative perfect storm and jumped a sharp $14 on the day. The precious metal closed above the Ichimoku cloud which had the top at 935.90 and this now opens up potential to 950/970 in the near-term. Speaking of clouds, USD/JPY closed below its cloud which lurked at 95.02. This is a bearish signpost in the short-term and 93 would be up for grabs should the declines in the equity space continue. The fundamental weakness in the Japanese economy would make any dip into that area a pretty attractive buying opportunity we would think.

Cable was one of the bigger movers with a massive 230 pip jump in the session to close near 1.5750/55. 1.5800/05 is the top of a daily up-channel in GBP/USD and a daily close above there would further confirm more strength in the days ahead. EUR/USD gains were driven by oil prices as crude rocketed above the $62/bbl level. The pair jumped more than 80 pips towards 1.3780 and should remain better bid while above the 1.3740 upside trigger here.

Upcoming Economic Data Releases (Asia Session) prior expected

  • 5/20 22:45 GMT NZ  Visitor Arrivals  APR  -0.50%  - -
  • 5/20 22:45 GMT NZ  Statistics New Zealand on Overseas Visitors
  • 5/20 23:50 GMT JN  Tertiary Industry Index (MoM)  MAR  -0.80%  -1.50%
  • 5/21 1:00 GMT AU  Consumer Inflation Expectation  MAY  2.40%  - -
  • 5/21 2:00 GMT NZ  Credit Card Spending for April  21-May  
  • 5/21 3:00 GMT NZ  Credit Card Spending (YoY)  APR  -5.00%  - -
  • 5/21 3:00 GMT NZ  Non Resident Bond Holdings  APR  73.20%  - -
  • 5/21 4:00 GMT JN  BoJ Monetary Policy Meeting  21-May