There are two important developments today. First, the recovery in the global equity markets is being challenged. Second, the yen has strengthened across the board, and is now at its best levels against the dollar since last September’s low.  

The MSCI Asia Pacific Index extended Monday’s recovery with another 0.5% gain. However, looking closer, the momentum faltered. The benchmark finished in the middle of the range, Japan’s Topix, which had been up a little more than 1% finished down nearly as much.  

European markets are nursing modest losses. Italian and Spanish bourses are underperforming, but the Dow Jones Stoxx 600 is off about 0.2% in late morning turnover. The S&P 500 is trading lower. It has rallied 5.6% off the pre-weekend low. The Dow Jones Industrials have rallied 1400 points during the same time. Opinion seems divided about the near-term outlook. The initial recovery has stalled, and the shape and extent of the pullback today may go a long way toward shaping the debate.  

Japan’s markets were closed on Monday, and although it initially played catch-up with the world, as the gains were reversed the yen strengthened. Stops appeared to have been triggered on a break of JPY108.40 and then JPY108.00. The dollar fell to nearly JPY107.50 in early Europe before tentative stabilizing. The dollar reached a low near JPY107.30 last September and carved out a low in the second half of 2016 around JPY100.  Intermittent support is seen near JPY105.

The euro spiked down to JPY132 at the end of last week. It traded inside the pre-weekend range yesterday and has an outside day in the works today. A break targets the JPY131 area but suggests potential toward JPY128-JPY130. Sterling held last week’s low a little below JPY149.00. A convincing break may target JPY147. 00. The Australian dollar is reversing lower against the yen after making a three-day high earlier. It peaked near JPY85.60 and is now near JPY84.60. Last week’s low (~JPY84.00) had not been seen since last June. The Canadian dollar did not find such support at it is now at eight-month lows.