USDJPY has fallen over 250 pips in the last few days and today is its biggest daily drop in 8 months as stimulus-hope premia is removed from the FX carry trade juicer. USDJPY has retraced all its post-FOMC gains in the last 2 days as the euphoria-to-disaster crowd continues to flood in and out. This dive has driven Nikkei 225 futures down almost 1000 points from Friday's highs, pressuring the Japanese stock market to near its cheapest to the Dow in 15 months.
2 weeks up and 2 days down - as hope is eviscerated...
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retracing all the post-FOMC gains (JPY losses)
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and smashes Japanese stocks lower...
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As a gentle reminder - as we noted here [9]:
Perhaps no chart better captures the current fleeting, momentum-chasing "euphoria to despair" sentiment in the markets, in which nothing is real or fundamentally-driven, and where everything is a "smoke and mirrors" illusion encouraging the speculative stampede into (and then out of) the comfort of printed paper "wealth", than the following visual summary of how foreign cash came to Japan, injecting a record amount of money on hopes that Abenomics would promptly send the Nikkei to 20,000, and upon realizing the failure of Abenomics to result in a virtuous market expansion (the Nikkei is down about 7% for 2014), has high-tailed it out of the land of the rising sun at the fastest pace in history!
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And keep in mind that the Nikkei is still roughly, and artificially, 50% higher than where it will be once the Abenomics euphoria is fully faded. Which is why the purple line may still have a very long way to go... in an inversely upward direction.
Source: Diapason Commodities Management