To The Moon

Last week, the Bank of Japan once again disappointed the market slightly, keeping interest rates unchanged while not releasing the signal of monetary policy shift.

Although we have talked about this direction before, after Kazuo Ueda reconfirmed, the characteristics of yen returning to financing attribute have become obvious. In the future, the yen is expected to act as the vane of risk appetite. When the market panics, the yen will have a chance to strengthen obviously.

The Bank of Japan announced that it will keep the target yield range of 10-year Japanese bonds unchanged at 0.5%, and at the same time, it will control the yield curve with greater flexibility, taking the upper and lower limits of the range as references in market operations, rather than rigid restrictions. Although this operation decided by the market has improved compared with the usual "paternalistic" style, its dovish nature has not changed. In addition, the Bank of Japan reiterated that it would not hesitate to increase its stimulus policy if necessary, which provided a reason for yen bears to continue to bet on the weakening of the yen.

Judging from the trend chart of yen,A capitalized inverted V reversal is basically a strong shift in market expectations for Japanese policy in the past few months. The change of governor candidate once made the market speculate that the Bank of Japan should follow the rhythm of mainstream central banks, but this is not the case.

With the change of price, the yen has started to run to the low level at the end of last year. Apart from the need to worry about unexpected intervention, it seems difficult to find an opportunity to help the yen turn around. However, it happens to be this environment and background, which also brings the opportunity to observe the price fluctuation of risky assets.

From the past history such as 2007/08, the sudden rise of yen is related to the higher level of risk-off. In other words, if we find a sudden rise in the yen, it may blow the clarion call for a change in market trends. If we take the price change of Japanese yen VS US dollar as a reference, then the United States and Japan need to fall below the weekly low level of 144.4 to imply a reversal.

It is worth noting that the current weekly line of the US stock index is very close to the previous swing low, which is also one of the early warning indicators of the market turning cold. Although there seems to be no heavy negative news, the downward pressure brought by key price positions is still obvious. In addition, crude oil is also at an upward difficult price, and the conservative forecast is also a callback. If there is new bad news in the future, it will be a reversal.

Last week, we talked about possible losses and trend changes. It is better to fall into the bag and watch the changes quietly. If you go up again, you can choose to short, and if you go down, it is also an optional direction to join short after waiting for the break. Finally, I wish you all a happy holiday, trade and life.

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