The market is currently very bearish on the Japanese yen, but short positioning has become extremely crowded. Going forward, we need to pay close attention to the Bank of Japan's policy decisions and changes in U.S. interest rates. There is more capital positioned on the short side than the long side. If short sellers begin covering their positions, the yen could rally sharply in a short period of time, potentially causing significant volatility in global capital flows.
If the Bank of Japan decides not to raise interest rates, it would be supportive for the U.S. dollar and technology stocks. It would also provide some support for risk assets through stronger competitiveness of Japanese exports.
From a geopolitical perspective, the market may believe that the probability of renewed escalation in the Middle East is currently low. However, if investors start to think the conflict could escalate, capital would typically move into safe-haven assets.
In that scenario, capital would likely flow into gold, U.S. Treasuries, the U.S. dollar, and energy stocks. Rising geopolitical tensions could push oil prices higher, benefiting oil companies while putting pressure on airline stocks. In the short term, funds may rotate out of AI, semiconductor, and high-growth stocks.
Samsung has already exceeded market expectations, and its share price has largely priced in the strong earnings, leading to profit-taking. The key things to watch now are whether the company raises its full-year guidance and whether HBM orders continue to increase.
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