Another huge rally in the Japanese yen in spite of massive amount of new helicopter money that was announced on Tuesday. It has now finally started to trigger huge selloff in the equity market as Yen carry trade unwinding has reignited, overwhelming the Fed buy programs. Gold and silver will be one of the major beneficiary of selloff in the stock market.
Unless the current surge in the strength of the Japanese Yen can reverse, the unwinding of the Yen carry trade should accelerate, and that is very bearish for the equity market. Fed governor Lockhart is again talking about interest rate hike hoping that could halt yen rally and prevent sharp dollar decline. However, the Fed has lost most of their credibility, and likely not have any major impact on the direction of the US dollar and Japanese Yen.
On the short term however, NQ resistance on Wednesday will be 4730.
-- Trading back above 4730 should halt further decline in NQ as long as Japanese yen does not have another big rally day on Wednesday. Without a pause or selloff in Yen, selling in the equity market should resume on Wednesday.
-- Trading below 4730 plus a surging Yen has the potential to cause a huge selloff in the equity market.
