Amidst market turbulence, one of the measures of whether fear is extreme is the VIX index (reflecting protection purchasing in US equities in times of uncertainty). However, it is not just the absolute value of the VIX index (which is at levels of the correction last summer), it is also the pace of the rise in this that is important. The pace of the rapid snap higher is equal to levels seen in October 2008 when a reactionary low formed. Despite this near term positive reading on this contrarian indicator, we are concerned by the rollover in commodity indices as a global slowdown becomes increasingly priced into assets. As such, commodity currencies are likely to fall victim to further profit taking following reversal weeks posted on the NZD against both the USD and EUR.
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BARCLAYS CAPITAL
TECHNICAL RESEARCH