This is the most important chart in the world today.
It's the chart of the Japanese Yen vs the USD.
Why is it so important?
1. For 30 years Japan has 0% interest on their currency.
2. As a result for 30 years investor borrowed YEN at no cost and invested it globally. They invested in T-Bills abroad and a basket of risk assets including the Nasdaq.
3. For the first time in many year the BOJ increased interest rates this week by 0.25%. This was almost unprecedented.
4. As a result of the increased interest rates and the signal to the market, investors are now concerned that the money they borrowed for free is no longer free and therefore they are unwinding their trades and sending the funds back to Japan
5. The estimated quantum of this trade is over $4 trln!!
The only question that remains is how aggresive they will be but for now YOU MUST KEEP YOUR EYES ON THIS CHART! If it keeps strengthening risk assets are going to get murdered!!
