This evening's price action seems to be reflecting major unwinds occurring. Gappy strength in EUR suggests more repatriation (following the sell US stocks and bonds action we saw in the day-session) and even as JGBs rally modestly, Japanese stocks are getting monkey-hammered. Goldman's always-aware-of-the-risks client base [9] just got 'muppeted' as the Long Sept Nikkei trade was stopped out at 12,700. JPY is bid on the carry unwind and is trading at the day-session lows around 95.00. This is TOPIX's biggest down day in over a week as Tech, Telecoms, and Consumer Goods are all down over 3%.
As a reminder, we made a very explicit warning just this past Sunday [9]:
Whenever Juncker is lying, or Goldman openly commands the muppets to buy, you know the situation is serious, and Goldman has a lot of unwinding to do. Which is precisely what just happened following the Squid's reco to buy Nikkei September futures (NKU3) ahead of the BOJ meeting. What is Goldman's thesis in a nutshell: hope may be fading in Abenomics, but the "incentives for Governor Kuroda to use the [upcoming BOJ] meeting to signal a firmer and clearer commitment to the easing course, and to highlight the potential to do more, are high and rising." In other words, please bet the farm on more of the same jawboning that lead to a 20% loss for anyone who bought as recently as 2 weeks ago. Oh, and by the way, complete the sentence, whenever a client is buying from a Goldman flow trader, the Goldman flow trader is [____].
Now the only reason we are not all in short on the Nikkei following this plea to buy whatever NKU3 Goldman's flow is selling, is that Tom Stolper did not endorse the recommendation.
As for the final outcome...
[10]
Sure enough:
[11]
and JPY...
[12]
So much for the great and powerful Bank of Japan Qualitative and Quantitative Easing: the USDJPY is now back to April 4, or MEGA-QE announcement, levels:
[13]
and in case you didn't think that everything hinges on the Japanese markets... (h/t @RonnieSpence)
[14]
Charts: Bloomberg