It’s been a crazy few weeks in the markets, and thankfully we have summoned our inner traders to ride the waves up and down.

This is not a macro market, but rather a market driven by the rug-pulling of leveraged accounts.

At one point yesterday, the market started forming a base-case around an emergency cut in August, but those bets have been put to rest by a continued decent flow of news from the actual economy.

The main culprit behind all of this is the BoJ and the turning tide in USDJPY. While fair value models hint that we could go sub-140, it rarely happens in a straight line (even if it felt that way for a few days). The rebound in USD rates, based on the repricing of these emergency cut fears, will lead USDJPY higher in the short term.

This will likely alleviate some of the selling pressures in the equity space, while the commodity space may not welcome the stronger USD.

Chart 1: USDJPY fair values remain lower than current spot levels