The Market Situation Report is a condensed version of our institutional newsletters, infused with a touch of humor. We plan to release it daily, right before the opening of the US market, and present it in a most familiar format to retail traders’ eyes by using Tradingview charts and Memes. To learn about the incentives behind it you can visit the link below.
Who kicked the market up!?
you might ask yourself, what just happened, and why the market is going up in the face of bad economic news in particular the job data? Worry not, I am here to address that.
BOJ playing hide and seek with the market!
As you know, BOJ has declared the 1% long-term interest rate is a soft barrier! What is happening here is that since the 150 USDJPY rate is getting punched, indicating it is not gonna hold, they are inducing that they are willing to let the rate flow semi-freely. In plain words, punch the rate once and punch the rate once so USDJPY can breathe! So, this week the world lost its currency trade anchor!
Now, time to visualize that.
We suspect that the space between the previous intervention in Yen USD will be the new play zone for the market to assess BOJ’s desire to intervene in the yield. Now, we have to add SPX to see its broad effect.
What a strange chart! So the BOJ offers a premium on bonds and SPX goes up! What a controversy! but why?
As soon as BOJ says 1% is fine for the long-term rate, the yield on UST falls! This is Japanese saying I am going to own US bonds which pay more and pay in USD! I understand you are offering 1% on local bonds, but it is not yielding enough! And that injection of liquidity into the US market raises the SPX.
So, why NIKKEI rallies with SPX? I know that I have mentioned the increased correlation in financial assets, and this is not an exception, but, this is a good indication the local market believes that BOJ raising rates will not curb the diminishing Yen value, seeing NIKKEI as a safe haven (safe to say wrongfully, but that does not mean it will tank!).
To conclude, pay attention to the 145/150 range on USDJPY.
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