What if the U.S. cuts interest rates?

What if the U.S. cuts interest rates?

Figure 1. The YEN CARRY TRADE method is Big Tech LONG and has been carried out as IWM SHORT method. To find out about it, I want to see the correlation between QQQ/IWM and USD/JPY, so please take a look at it carefully.

The part where QQQ/IWM and USD/JPY began to go together was exactly when SVB BANK RUN exploded in March 23.

They didn’t go together before March 23, but as SVB BANK RUN burst, a lot of money was poured into big tech, and the charts of QQQ/IWM and USD/JPY began to go together.

USD/JPY rose because the yen continued to weaken as Japan’s zero-interest rate policy weakened the JPY, which is in the denominator, and USD/JPY rose,

The QQQ/IWM chart was able to synchronize with USD/JPY as it was able to borrow yen for free according to the zero interest rate, and the money was invested in big tech with that money, so the QQQ/IWM chart was able to go up with the USD/JPY.

This is the evidence and reason why YEN CARRY TRADE raised Big Tech, and on the contrary, if YEN CARRY TRADE unravels and becomes UNWIND, Big Tech could face downward pressure.

Of course, not only YEN CARRY TRADE, but IMPLIED VOLATILEY, which was very low, also played a part.

If IMPLIED VOLATILTY is low, the cost of trading an option is lower, which is why GAMMA SQUEEZE happened and is higher accordingly.

Figure 2. The Fed’s probability of cutting rates is 111% in September, and the market is looking to cut rates. A rate cut would cause the charts in USD/JPY to fall.

But on top of that, the Bank of Japan (BOJ) wants to raise interest rates this July 31. When Japan raises interest rates, the yen rises and the USD/JPY falls again as its denominator strengthens.

With the flow of YEN CARRY TRADE, I think the probability of receiving adjustment increases significantly as QQQ has benefited.

Of course, I don’t know exactly when the FED will cut interest rates and when the BOJ will raise rates, but the odds are rising and I can’t match the market timing

I don’t recommend Short, I’m just watching the market. Of course, this outlook is getting closer, so I’m not going to touch the Nasdaq and SP500’s overvaluation.

The crude oil sector, which is just undervalued, is probably a different story because it accounts for less than 3% of the index, has not benefited from YEN CARRY TRADE at all, and is linked to oil prices.

We’re just watching with a certain amount of cash because this outlook is getting closer.

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