Tuesday, December 20, 2022

#Yen Review $FXY $JPYUSD

Yen Review
Trading noise, the random movement of price over the short term, does not control trends, cycles, and profits. The majority, an emotionally driven group focused solely on price, often interprets it as meaningful information. This leads to confusion, frustration, missed opportunities, and leaves the majority as the bag holders of trend transitions. The Evolution of the Trade helps investors stand separate from the majority.

The Yen's overall trend, revealed by trends of price, leverage, and time, are defined and discussed in The Matrix for subscribers.

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The invisible hands assault on the Japanese Yen began 20 months ago. The majority remains focused on the game, it doesn't stop the institution from burning down.

Japan and China own roughly $2 trillion in US Treasury holdings. This number was higher only a few years ago. If countries like Japan continue reducing their holdings, long-term interest rates, those not controlled by the Fed, are headed higher. The Fed does not control the long end of the curve. Remember that when the Internet continues to debate a Fed pivot. The most important concept of that debate, the Fed is not all powerful, is never discussed.

Today's review discusses some important trends unfolding behind the scenes in the Japanese Yen.

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Japan announced they were tweaking their official policy toward the Yen. This comes in response to the numerous financial fires erupting not only in Japan but also around the world.   The uptick in borrowing through the discount window suggests strain.

Social media will likely create numerous threads explaining short-term price action with no discussion of the long-term consequences. They'll explain why the Yen is soaring, but omit that all currency interventions, a sign of growing strain and weakness in Japan, always fail. Those that do not understand this fundamental rule of free markets will learn through pain and tears in a few years.

Japan's fiscal backdrop is moving towards collapse. While Japan's policy tweak kicks the can down the road (a little longer), it will be used by the invisible hand to sell without affecting price.

Inflation has arrived in Japan, and it's not going away. The BOJ recognizes that not by words but rather actions. Hiking rates reflect real tangible worries. Assuming these events will force the Fed to pivot without consequences is completely delusional.

The invisible hand will defeat the BOJ. It's only a matter of time. It will defeat it by sending interest rates higher, thus, destroying their fiscal position. What is taking place in Japan will spread across the global economy, and eventually reach the US (the core economy). Failure of the global financial system is coming, and it won't be saved by the BOJ, ECD, the Fed, or #Bitcoin.

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