Last week was all about risk-on. The fiscal cliff was averted, US yields broke out to multi-month highs, equities rallied to pre-crisis mortgage crisis highs and USD/JPY vaulted 88.
Week 2? Risk-off seems to be taking hold. Profit-taking underway in USD/JPY and JPY crosses and US yields are edging toward the trading range which contained them for the later half of 2012.
Volatility is good, no?
Near-term, keep an eye on the 10-day moving average in USD/JPY at 86.86. A break below could be a warning sign for a deeper pullback in risk appetites.
