Japan is opening ugly - the commodity rout continues with rubber, gold ($1325), and copper all down hard and stocks also being hit as liquidations continue. JGBs are modestly bid 1-2bps (though fading). JPY's bounce off the after-hours spike is fading...
JPY was its strongest at the start of October - and then the new Abenomics plan began. Very quickly the "long of gold in JPY terms" trade became extremely popular. After an impressive 16.4% rise into mid-February, gold-in-JPY corrected modestly; but the BoJ-inspired action smashed gold-in-JPY back up to its recent highs (helped by the seeming capitulation is JPY longs on the bigger-than-expected QQE). This appears to be the last straw on this trade. With JPY shorts so extremely positioned [6], the small rally on Thursday/Friday in JPY sent many scrambling to cover and, along with the need to unwind any and every asset to cover cash needs for JGB volatility [7], the avalanche began in gold-in-JPY. In 2 days, the entire Abe-inspired 'rally' in gold-in-JPY has been undone and all post-Abe buyers are now underwater. Whether this marks a short-term capitulation of these positions is unclear but CTFC CoT this week will be intriguing - and further JGB vol will not help. The rally in JPY of the last two days is the largest in 35 months - so someone clearly broke something...
Gold in JPY has retraced all its post-Abe gains...
[8]
It would appear that it is no longer moving from the lower left to the upper right...
and JPY is rallying faster than it has in 35 months...
[9]
and Gold is plunging on the Japanese open (as margin calls flush a few more out)...
[10]
Japanese interest rate volatility is surging higher and gold is being sold to match it still (as we discussed here [7])..
[11]
Something broke when the BoJ went full retard...
Charts: Bloomberg