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With vaccinations in course around the globe, the financial markets are looking for signs of when the global economy will shake off the coronavirus hangover and what a post-COVID economy might look like. Two recent moves in the U. S. over the past few weeks - one related to rates and market volatility and the other related to Treasury issuance and Treasury financing - are muddying the waters as investors struggle to get a clearer sense of what lies ahead in terms of moves by the Federal Reserve and Treasury markets in these rapidly shifting market dynamics. Back in August 2020, the Federal Reserve made a critical change to their monetary policy stance when they formally shifted from targeting 2% annualized inflation to "average inflation targeting. While it is unclear what inflation rate is "too high" in their view, it became very clear that they intended to keep short-term interest rates at historically low levels even if the economy recovers, the unemployment rate declines, and inflation exceeds 2% over the next several quarters.

Currently: Cash Looking to: Buy @ 105.848 We suggested buying USDJPY at 104.41 with stops on a close below 103.31 and with a target of 108.30. The trading action last week took prices up through short-term resistance and opened up much more upside potential for USDJPY in the near-term. We would look to get long of USDJPY at 105.848 with stops on a close below 104.921 and with an upside target of 109.512.

We suggested buying at $33.66 with stops on a close below $31.90 and with an upside target of $40.15. The iShares Brazil ETF (EWZ) dropped sharply this week – slicing through our long-side entry point and nearly violating the stop-loss trigger level put forth here in last week’s report. In taking a look at the chart this week, we are lowering the stop trigger to $31.48. Get long here with stops on a daily close below $31.48 and with an upside target of $38.58.

We suggested shorting at last week’s levels with stops on a close above 31,000 and with a target for covering / getting long at 26,500. The Nikkei 225 Index sold off last week – picking up downside momentum as the weekend approached. We are staying short-term bearish and longer-term bullish. Look to short near 29,671 with stops honored on a close above 30,213.28 and with a target for covering / getting long at 26,500.