Wicked Moves and Wicked People

The tragedy in Boston overshadowed a fascinating trading day that featured tremendous moves in stocks, yen crosses and the bigger gold drop in 30 years. It was a classic 'risk off' day with the yen surging and commodity currencies crumbling. The minutes of the April RBA meeting are upcoming.  6 Gold and Silver longs hit all targets while 5 other metals trades are still in progress/awaiting fill.  See Latest Premium Insights.

Gold spectacularly cascaded lower on Monday in a nearly $150 fall. The decline fractured many support levels and touched as low as $1335. The final key support line to break was the 55-month moving average at $1350 – it has been intact since the start of the gold bull market in 2002.

The selloff started in gold but quickly spread to other commodities, then stocks and then forex.

Margin calls could trigger a fresh wave of selling on Tuesday after the CME hiked margin requirements on gold, silver, oil and other commodities.

The forex market was generally able to withstand the pressure from commodities and stocks for most of trading but yen crosses broke down after USD/JPY dropped below 97.50. Selling accelerated after the explosions in Boston.

In any sign of war or natural disaster, the market's reaction is always to buy yen and bonds and ask questions later. As the questions begin to be answered, the reaction tends to retrace but with geopolitical events there is no set playbook. In this case, the gold/commodity drop is an ongoing and dominant factor.

USD/JPY has bounced aggressively, touching 97.10 after tumbling as low as 95.80. It is difficult to call a bottom until the commodity complex shows some signs of stability.

The main risk in Asia-Pacific trading is the minutes of the April 2 RBA meeting at 0130 GMT. The central bank retained a 'scope to ease policy further' and was slightly more dovish than anticipated. The main risk from the minutes is that they reveal policymakers are more eager to move to a neutral stance.