The global financial markets are currently experiencing massive pressure, heavily driven by intense volatility in the currency market. A recent global financial update that went viral on social media highlighted a dramatic MASSIVE DUMP, where $700 billion was suddenly wiped out from the US stock market in just 45 minutes, including SpaceX alone losing $250 billion in value.
This sudden equities rout is closely linked to a massive liquidation wave triggered by the unwinding of the Yen Carry Trade a popular strategy where investors borrow Yen at low interest rates to buy higher yielding global equity assets. As rumors intensify that the Bank of Japan (BOJ) will step in with aggressive currency interventions to dump the Dollar and strengthen the Yen, global investors are rushing to sell off their stocks to pay back their borrowed JPY loans. Reports from major financial institutions confirm that the BOJ's tight stance on defending key psychological levels has triggered an aggressive sell off across global stock indices.
Long Term Technical Analysis and Market Indicators
To understand the macro perspective, the price movement of USD/JPY is officially making history when analyzed using the large 3 Month (3M) time frame.
The highest peak marked with the orange circle on the chart highlights a powerful resistance level established back around 1990. For 36 years, the price of USD/JPY never managed to break through or return to that specific zone. However, by breaking cleanly above the 161.705 level today, the market has officially executed a historic breakout. This confirms that the US Dollar is trading at its strongest position against the Japanese Yen since the 1986 - 1990 period.
For the short term view, let's look at the current market momentum using popular oscillator indicators.
| Indicator | Value | Market Status / Condition |
|---|---|---|
| RSI (14) | 54.517 | Neutral (Price is moving stably in the middle range) |
| STOCHRSI (14) | 23.964 | Oversold (Selling pressure is overextended) |
| STOCH (9,6) | 65.125 | Buy (Upward momentum is still maintained) |
| ATR (14) | 0.0529 | High Volatility (Price movement is currently aggressive) |
Note: The combination of these indicators shows an interesting setup. While the standard RSI sits in neutral territory, the Stochastic RSI confirms that short term selling pressure is already highly oversold. Supported by a high ATR value, this setup usually serves as a strong signal that the temporary downward correction is running out of steam, and the market is getting ready for an aggressive bounce upward.
Nevertheless, as traders, we must remain alert to the threat of sudden interventions by the BOJ. Looking at the daily (1D) time frame, the impact of past interventions has proven to be incredibly aggressive.
Based on historical data, the market was previously thrown down by -7,114 pips (-4,47%) in February and dropped again by -5,575 pips (-3,47%) in May due to sharp intervention liquidations.
Even though the threat of an instant drop is real, the broader USD/JPY uptrend is protected by a solid structural foundation on the weekly (1W) time frame.
Technically, this giant uptrend has a major defense territory waiting below. The support at the 141,500 - 140,212 zone is the strongest area, acting as the main fortress for buyers. As long as the price does not cleanly break below this green zone, the macro trend remains firmly dominated by the bulls.
My Opinion
Reacting to this phenomenon, the global stock market slump triggered by the USD/JPY wild swings serves as a crucial reminder of how heavily the forex market impacts global equities. In my view, while the threat of sudden interventions from the Bank of Japan can trigger sharp drop of hundreds of pips in an instant, it will not easily reverse a primary macro trend that has been building up for decades.
The oversold signal on the daily indicators combined with the solid psychological support at the 141,500 - 140,212 zone actually maps out a very solid opportunity. In conclusion, any deep correction driven by government intervention is not a sign of a market crash, but rather a massive discount window to look for the best buying momentum aligned with the strong macro trend.
Source
- Japan unveils $2.3 trillion investment plan for next 14 years
- USD/JPY, Nikkei 225 Outlook: Nikkei Washout Shifts Focus to BOJ Intervention
- Crypto Rover
Posted Using INLEO
