Yen / BOJ Stabilization Highlights Modern Market Order
That government’s have contingency plans to stabilize their financial markets under any circumstances should come as no surprise. What was a surprise, in the case of last Friday’s terrible earthquake, was the speed which Japan did so. Yen shorts were stopped out before most Western traders even knew about the tragedy. Any speculator who did short the yen on the news was put into a progressively worse position throughout the European and U.S. sessions. Had the BOJ and MOF not acted so quickly holders of Japanese asset class and money markets would likely have suffered shocking market loses last Friday.
The news could have easily caused a blow to global stock indices also, particularly given the southernly direction both global and U.S. stocks were already moving in just before the terrible quake hit. Again MOF to the rescue. The S&P 500 ended up reversing losses, i.e. the shorts were run, while the direction on the Weekly EURUSD and AUDUSD remained higher, net effect again: shorts clipped. The powers that be obviously feel that the world is a better place when market meltdowns can be avoided. If at any time as a trader you’re tempted to shake your head about market action, just remember nobody cares about the speculators whose money gets vacuumed away following another successful market intervention/operation. And if something ever happens that the combined powers that regulate global markets can’t handle? Well then we’re going to have a lot more to worry about than money. Or put another way by an old salt who used to trade everything under the sun from his office in the Chicago Board of Trade: “as long as the earth stays on its axis we’ll be all right”.
Jay Norris is Chief Market Strategist at Clovernest Financial Group, and the author of Mastering the Currency Market, McGraw-Hill, 2009.
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