Citi: "Be Prepared For All Sorts Of Insanity Today; Everyone I Talk To Wants To Fade This Move"

Confused by today's events? Don't worry - so is everyone else.  Here is a note from Citi FX' Brent Donnelly noting that while on one hand "almost everyone I talk to wants to fade this move; it’s just a matter of how long to wait before going the other way" on the other "this smacks of confirmation bias when a market is so bearish."

His words of caution: "Be prepared for all sorts of insanity today as the market tries to wrap its collective head around month end flows + what this BOJ action means."

From CitiFX Wire, by Brent Donnelly:

USDJPY: Skyscraper

So here’s what happened last night in case you were sleeping. Not easy to trade:

I am pretty mixed on what this BoJ move means but my main observation is that people are incredibly skeptical. Almost everyone I talk to wants to fade this move; it’s just a matter of how long to wait before going the other way. To me this smacks of confirmation bias when a market is so bearish that even a completely unexpected rate cut by a G3 central bank is somehow bearish??

It speaks to the unrelenting bearish vibe out there.

Be prepared for all sorts of insanity today as the market tries to wrap its collective head around month end flows + what this BOJ action means.
 
Simmering in the background is growing talk of rate cuts and possibly negative rates in the United States as many highly-respected commentators (Dalio, Grant, Gundlach…) think the Fed will be forced to cut rates and go negative before long. This probably explains why the dollar trades so poorly post-FOMC.