This is a yentervened JPY short squeeze on carry trades and prevailing price trends (crowded positions), with global cross-asset spillovers: NDX, Russell 2K, UST curve, Gold, MXN & more.
Weston, thank you for your precise input as always. So, do you think that the BoJ's plan is to keep the JPY under 160 with many small interventions before making a big move at the end of July's meeting and finally manage to reverse the long-term trend? It seems that 160 is really the level they want to defend at all costs. Thank you.
Thanks Marco. Well we did trade > 160 for like 10 straight trading days and hit 162 highs - which isn’t to say that they don’t NOT care about specific levels of intolerance, but I think that their concerns about defending against a specific spot rate level and/or amount of volatility has now shifted more towards defending against a trend - breaking an existing trend, as well as preventing a new trend from gaining steam. It used to be that they’d defend against sudden sharp $¥ breakout moves and smack it back down, but now, I think (or, at least I hope) they’ve realized that a slow, linear, drip-drip move (i.e. what I mean by “a trend”) is actually just as bad, if not worse than the hyper volatile break out move. Because for those types of +2~3 handles in 30 mins moves, they’re given a “call to action” of sorts. And those speedy moves make it hard to tell what (if any) price level they’re acting upon.
But a slow and steady +½ yen ↑ per day trend - that’s not the crazy breakout volatility to justify battling back against - and they’d have to just sit there and watch the slow meltdown. And if they did act to yentervene at whatever level without the volatility preceding it, then that level will be cemented in markets’ psyche as “the level” to have to defend, even if there wasn’t anything special about whatever that level was.
So, again - IMO, theyre now in the trend killing game. And that’s why you see one mini yentevention after another, in this new regime of yentervention tactic 2.0
Weston, thank you for your precise input as always. So, do you think that the BoJ's plan is to keep the JPY under 160 with many small interventions before making a big move at the end of July's meeting and finally manage to reverse the long-term trend? It seems that 160 is really the level they want to defend at all costs. Thank you.
Thanks Marco. Well we did trade > 160 for like 10 straight trading days and hit 162 highs - which isn’t to say that they don’t NOT care about specific levels of intolerance, but I think that their concerns about defending against a specific spot rate level and/or amount of volatility has now shifted more towards defending against a trend - breaking an existing trend, as well as preventing a new trend from gaining steam. It used to be that they’d defend against sudden sharp $¥ breakout moves and smack it back down, but now, I think (or, at least I hope) they’ve realized that a slow, linear, drip-drip move (i.e. what I mean by “a trend”) is actually just as bad, if not worse than the hyper volatile break out move. Because for those types of +2~3 handles in 30 mins moves, they’re given a “call to action” of sorts. And those speedy moves make it hard to tell what (if any) price level they’re acting upon.
But a slow and steady +½ yen ↑ per day trend - that’s not the crazy breakout volatility to justify battling back against - and they’d have to just sit there and watch the slow meltdown. And if they did act to yentervene at whatever level without the volatility preceding it, then that level will be cemented in markets’ psyche as “the level” to have to defend, even if there wasn’t anything special about whatever that level was.
So, again - IMO, theyre now in the trend killing game. And that’s why you see one mini yentevention after another, in this new regime of yentervention tactic 2.0