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FX Markets Flashing Risk Warning Signal

Tyler Durden's picture





 

Via Steven Englander of Citi,

Our risk-warning signals have backed up sharply in the last couple of weeks and especially over the last day or two.  The back-up has been so sharp that they have unwound all the easing in risk aversion since September/October. Our indicators are based on implied volatility on currencies that are very sensitive to risk appetite.

We focus on risk reversals among risk-correlated currencies. (light blue line, our risk reversal index is a basket of AUD, SEK, CAD and sign-reversed JPY 1mth 10 delta risk reversals)

Both the pace and backing up of this index point to a sharp increase in nervousness over risk-correlated currencies. Similarly our index of risk sensitive ATM implied volatility (red line, a basket of AUD, SEK, and CAD 1mth 10 delta implied volatility) is back to mid-October levels. The spot index of our risk sensitive currencies (dark blue line, a basket of CAD, SEK and AUD spot) has backed up a bit but not nearly as much as the tail risk indicators have.

To be clear these indications are still suggesting that risk aversion is very low by 2008 to mid-2012 standards, but all of our indicators have backed up markedly, suggesting that despite the abundance of liquidity investors are getting nervous.

 


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Thu, 02/21/2013 - 16:51 | Link to Comment TheAlchemist
TheAlchemist's picture

So when will they classify the USD as a risky currency?

(One can dream, no?)

Thu, 02/21/2013 - 16:54 | Link to Comment Edward Fiatski
Edward Fiatski's picture

Didn't'ya hear?

ANNUIT COEPTIS - NOVUS ORDUS SECLORUM!

Can't argue with that.

Someone plz, plz find the capstone.

Thu, 02/21/2013 - 17:10 | Link to Comment whatsinaname
whatsinaname's picture

gave me a good chance to get a little more gold.

Thu, 02/21/2013 - 16:53 | Link to Comment amadeusb4
amadeusb4's picture

Investors are getting nervous? Is that because the DOW is making love to its all time high while the GDP is negative? What could possible go wrong?

Thu, 02/21/2013 - 16:58 | Link to Comment delacroix
delacroix's picture

miscarriage?

Thu, 02/21/2013 - 17:57 | Link to Comment CH1
CH1's picture

the DOW is making love to its all time high while the GDP is negative

They don't care. Their inner lives are secured by avoiding reality.

Thu, 02/21/2013 - 19:36 | Link to Comment max2205
max2205's picture

Bens driving. Get on board the TNA train'

Thu, 02/21/2013 - 21:44 | Link to Comment Buck Johnson
Buck Johnson's picture

No kidding, the game is about to correct and badly.

Thu, 02/21/2013 - 16:56 | Link to Comment alien-IQ
alien-IQ's picture

EUR/USD broke the uptrend channel it has been riding since July 25. I'm looking for a break of the 100DMA at 1.31 to happen hopefully by tomorrow. Then we could be in for a nice new drop for that pair...and all that implies.

Thu, 02/21/2013 - 17:00 | Link to Comment Edward Fiatski
Edward Fiatski's picture

Whether it is tomorrow or not depends solely on German GDP data.

Tune your radios to 69.This.Shit's.Fucked.101 at 7:00 AM GMT tomorrow.

Thank you

Thu, 02/21/2013 - 16:59 | Link to Comment busted by the b...
busted by the bailout's picture

Let 'em eat risk.

Thu, 02/21/2013 - 17:00 | Link to Comment ekm
ekm's picture

What abundance of liqudity?

 

Liquidity has already purchased all the stock market, as Dick Fisher said.

 

There's nothing left to buy. Liquidity is going to the shadow banking to......die in peace or in turmoil.

 

It looks more like a turmoil to me.

Thu, 02/21/2013 - 17:00 | Link to Comment The worst trader
The worst trader's picture

Sure............BTFD that is all

Thu, 02/21/2013 - 17:04 | Link to Comment Caracalla
Caracalla's picture

No more QE means BTFD is dead.  Markets going down, the only question is how fast.

Thu, 02/21/2013 - 17:01 | Link to Comment kaiserhoff
kaiserhoff's picture

And closing down.  That's not "constructive".  WTF?

Thu, 02/21/2013 - 17:05 | Link to Comment ebworthen
ebworthen's picture

The markets are made of spun FED sugar, a giant blob of cotton candy on a stick; investors should be nervous.

Thu, 02/21/2013 - 20:49 | Link to Comment Venerability
Venerability's picture

EB is Worthen - as every human being is.

THE BOO'S STOP NOW.

THEY STOP ON YAHOO.

THEY STOP ON SA.

THEY STOP ON INVESTOR VILLAGE.

THEY STOP AT BABY SITE BARCHARTS.

THEY STOP EVERYWHERE ANY STOCK IN MY PORTFOLIO IS CONCERNED.

I AM NOT AFRAID OF FIGHTING TO THE DEATH FOR THIS NOW.

I DON'T WANT TO.

I WOULD RATHER YOU JUST BACKED OFF AND LET ME BE HAPPY AGAIN.

BUT I CANNOT HAVE YOU DESTROYING ONE MORE MONTH, ONE MORE WEEK, ONE MORE HOUR OF MY LIFE.

THERE ARE SEVEN BILLION PEOPLE IN THIS WORLD. I AM NOT AT THE CENTER OF THE WORLD ECONOMY. I AM NOT AT THE CENTER OF ANYONE'S WORLD EXCEPT MY OWN - NOT YOURS.

15 YEARS AND 12 DESTROYED COMPUTERS IS ENOUGH.

THERE IS NOTHING WHATSOEVER "FUNNY" ABOUT THIS ANY LONGER.

YOU CONTACT "GENERAL MISHKA" AND "COLONEL FOO" AND "MENSA STEVIE" AND CARSON BLOCK AND THE ENTIRE PROP DESKS OF RENAISSANCE TECHNOLOGIES AND TDAMERITRADE - AND YOU TELL ALL OF THEM TO JUST CEASE AND DESIST BEGINNING RIGHT NOW.

I AM PREPARED TO MAKE THIS INTO THE CAUSE CELEBRE OF THE CENTURY. WHAT DO I HAVE TO LOSE?

BUT YOU HAVE EVERYTHING TO LOSE.

YOU CAN CONTROL YOURSELVES. YOU'VE HAD TO DO IT BEFORE. YOU DO IT AGAIN NOW.

DR. ELLEN B. BRANDT

Thu, 02/21/2013 - 17:08 | Link to Comment news printer
news printer's picture

wacko story:

'The water did have a funny taste': Body is found in water tank at 'cursed' Cecil Hotel

http://www.independent.co.uk/news/world/americas/the-water-did-have-a-fu...

 

Thu, 02/21/2013 - 17:17 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

WARNING, WILL ROBINSON, WARNING!!!!!!!!

Thu, 02/21/2013 - 17:21 | Link to Comment Dr. Engali
Dr. Engali's picture

Danger Will Robinson FX markets are flashing a risk warning signal:

 

http://www.youtube.com/watch?v=OWwOJlOI1nU

Thu, 02/21/2013 - 17:25 | Link to Comment Venerability
Venerability's picture

I Love Life, and I Don't Want to Die. But You Have Left Me With No Choice.

You have taken away my entire chance of survival, just when I was finally close to getting back to where I was before the 2008 Crash.

Fifteen years of mass gang rape, because a group of sick, creepy little psychopaths thinks it's funny.

I don't think anyone in human history has ever suffered as much as you've made me suffer. For nothing! For a goddamn malicious game!

I hope every single one of you burns in Hell forever.

Dr. Ellen B. Brandt

Thu, 02/21/2013 - 20:05 | Link to Comment butchee
butchee's picture

What about the classic risk on pair the AUD/JPY?  That is at its 78.6 Fib retrace to the ATH back in the halcyon days of risk-alicious, CDO infested 2007.  What could possibly go wrong?

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