Carry Unwinding but yet Nikkei continues to fall? | Forex Factory

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Carry Unwinding but yet Nikkei continues to fall?

  • #1
  • First Post: Aug 17, 2007 12:23pm Aug 17, 2007 12:23pm
I was wondering since the appreciation of the yen is happening so rapidly, it seemed contradictory that the Nikkei are reaching multiyear lows. With more people buying the yen once again, shouldn't there be more support in the japan stock market. or is the Nikkei's fall merely reflecting what's happening on the DJIA?

Gary
  • #2
  • Aug 17, 2007 12:27pm Aug 17, 2007 12:27pm
maybe carry trades are going to continue?
Trade what you see, not what you think.
  • #3
  • Aug 17, 2007 12:27pm Aug 17, 2007 12:27pm
Japan is an exporting country, so a strong yen hurts their corporate interests, hence weaker Nikkei.
  • #4
  • Aug 18, 2007 9:02am Aug 18, 2007 9:02am
Quoting Trader KGB
Japan is an exporting country, so a strong yen hurts their corporate interests, hence weaker Nikkei.
Excellent point.
  • #5
  • Aug 18, 2007 9:11am Aug 18, 2007 9:11am
Quoting HalifaxCB
Excellent point.

I still see a test lower for the JPY crosses
Patience + Humility + Study = Success
  • #6
  • Aug 18, 2007 9:48am Aug 18, 2007 9:48am
Quoting Kayoubi
is the Nikkei's fall merely reflecting what's happening on the DJIA?
Yes.
Trust price. Know yourself.
  • #7
  • Aug 18, 2007 10:16am Aug 18, 2007 10:16am
Quoting DutchTrader
I still see a test lower for the JPY crosses
I agree, the problem is is that now we move into a high volatilty area before things settle down. Strike a big bell hard, it takes awhile to stop ringing. I haven't got a good handle on what to expect for ranges (mainly w/r to eur/jpy) for the next week, but some factors other than the the Wall St. woes to look at are the possibility of the BoJ not changing rates next week (or even lowering them), plus the risk of intervention if USD/JPY crosses 110.
  • #8
  • Aug 18, 2007 10:23am Aug 18, 2007 10:23am
Quoting HalifaxCB
I agree, the problem is is that now we move into a high volatilty area before things settle down. Strike a big bell hard, it takes awhile to stop ringing. I haven't got a good handle on what to expect for ranges (mainly w/r to eur/jpy) for the next week, but some factors other than the the Wall St. woes to look at are the possibility of the BoJ not changing rates next week (or even lowering them), plus the risk of intervention if USD/JPY crosses 110.

Exactly this fed ease just widens the ranges, say from 112 to 115, in usd/jpy
Patience + Humility + Study = Success
  • #9
  • Aug 18, 2007 12:02pm Aug 18, 2007 12:02pm
Quoting Trader KGB
Japan is an exporting country, so a strong yen hurts their corporate interests, hence weaker Nikkei.
Nasty down spiral: subprime crash -> Dow down -> panic takeover -> carry unwinding -> Yen stronger -> exporters hurt -> Asian stocks down -> global growth in jeopardy -> earnings droping -> more ppl subprime -> start again...

Fed's move, expect

subprime saved -> dow up -> panic vanishes -> carries recover -> Yen weaker -> exporter breath -> Asian stocks up -> global growth breath -> earnings saved -> ppl paying their bills -> start again.

Ain't it beautiful the world we live in?
  • #10
  • Aug 18, 2007 12:08pm Aug 18, 2007 12:08pm
Quoting cesarnc
Nasty down spiral: subprime crash -> Dow down -> panic takeover -> carry unwinding -> Yen stronger -> exporters hurt -> Asian stocks down -> global growth in jeopardy -> earnings droping -> more ppl subprime -> start again...

Fed's move, expect

subprime saved -> dow up -> panic vanishes -> carries recover -> Yen weaker -> exporter breath -> Asian stocks up -> global growth breath -> earnings saved -> ppl paying their bills -> start again.

Ain't it beautiful the world we live in?
Makes my head hurt

I'm just gonna stick to: chart setup = trade
Trust price. Know yourself.
  • #11
  • Aug 18, 2007 12:32pm Aug 18, 2007 12:32pm
Quoting cesarnc
Ain't it beautiful the world we live in?
Lol, very true. I would add in there somewhere BoJ threatens intervention-> Market knows maximum hard limits on risk -> carry trade resumes. If trading is thin over the next few weeks, and especially if the BoJ doesn't raise rates, I would expect some of the big aggressive specs to see how far down USD/JPY can get pushed, just to get an estimate of the BoJ/MoF "line in the sand"....
  • #12
  • Aug 18, 2007 1:09pm Aug 18, 2007 1:09pm
If the BOJ do intervene, I wonder how successful they will be. Looks as tho the odds are agianst them at the moment.Have we really seen the last of this credit crunch/carry unwind/total lack of confidance in the markets?RBZ intervened a few weeks ago to no avail.What do ppl think? cheers
Adam
  • #13
  • Aug 18, 2007 1:45pm Aug 18, 2007 1:45pm
Quoting Tkgod4fx
If the BOJ do intervene, I wonder how successful they will be. Looks as tho the odds are agianst them at the moment.Have we really seen the last of this credit crunch/carry unwind/total lack of confidance in the markets?RBZ intervened a few weeks ago to no avail.What do ppl think? cheers
The BoJ has always been successful in the past, especially at weakening the currency hard.

They have several things going for them - they can basically print money at will, since Japan is not (now) an inflationary economy, and if things get out of hand, they have huge reserves of foreign ccy's to keep bounces back from being damaging.

But more importantly, when they decide on an interventionist course, they do it deliberately (there's sort of a ritual of "showing concern" to "checking rates" before actual intervention) they go through to let the market know they are displeased, and then when they do go in they hit hard and make it stick.

As for RBNZ, I think they actually did a good job. They were pretty clear that while they knew they couldn't force the NZD/JPY down without harming their own economy, they could keep the risk levels high enough to keep the pair from getting too unstable. That generally happens when a market goes "beyond exponential" in its growth, which is typical of markets headed for big crashes (There's a good book on this by Didier Sornette, "Why Stock Markets Crash").
  • #14
  • Aug 18, 2007 2:16pm Aug 18, 2007 2:16pm
Quoting HalifaxCB
That generally happens when a market goes "beyond exponential" in its growth, which is typical of markets headed for big crashes (There's a good book on this by Didier Sornette, "Why Stock Markets Crash").

Ich will mehr als nur genug.

People can write a whole book around the fact that a parabolic price curve means no room for intermediate s/r?

Amazing
Trust price. Know yourself.
  • #15
  • Aug 18, 2007 2:26pm Aug 18, 2007 2:26pm
Quoting SeekingLight
Ich will mehr als nur genug.

People can write a whole book around the fact that a parabolic price curve means no room for intermediate s/r?

Amazing
No, they write books for people who understand that O(x^2) << O(exp(x)), and who might also know their cantata fundamentals
  • #16
  • Aug 18, 2007 3:22pm Aug 18, 2007 3:22pm
This debacle is not over yet.
Patience + Humility + Study = Success
  • #17
  • Aug 18, 2007 3:30pm Aug 18, 2007 3:30pm
Quoting HalifaxCB
The BoJ has always been successful in the past, especially at weakening the currency hard.

They have several things going for them - they can basically print money at will, since Japan is not (now) an inflationary economy, and if things get out of hand, they have huge reserves of foreign ccy's to keep bounces back from being damaging.

But more importantly, when they decide on an interventionist course, they do it deliberately (there's sort of a ritual of "showing concern" to "checking rates" before actual intervention) they go through to let the market know they are displeased, and then when they do go in they hit hard and make it stick.

As for RBNZ, I think they actually did a good job. They were pretty clear that while they knew they couldn't force the NZD/JPY down without harming their own economy, they could keep the risk levels high enough to keep the pair from getting too unstable. That generally happens when a market goes "beyond exponential" in its growth, which is typical of markets headed for big crashes (There's a good book on this by Didier Sornette, "Why Stock Markets Crash").
Danke fuer das Einblick HalifaxCB,think I said that right.
Adam
  • #18
  • Last Post: Aug 18, 2007 4:00pm Aug 18, 2007 4:00pm
Quoting DutchTrader
This debacle is not over yet.
We rarely see a thread here that survives the 2nd page within the main topic

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