The United States and Japan teamed up for an unprecedented currency intervention two weeks ago. The yen rallied. Retail traders saw the move and thought they'd cracked the code on easy money. They piled in long. The yen has now erased half those gains.
This marks the first time in history that central banks printed money to solve a problem and it didn't work forever. Experts are baffled. The Japanese Ministry of Finance spent billions of dollars propping up their currency. The Federal Reserve joined them. Two entire governments with unlimited money couldn't keep a line on a chart from going down for fourteen days.
Somewhere right now a guy named Brett is staring at his phone trying to figure out why his carry trade unwound in the wrong direction. Brett read three Twitter threads about the intervention. He learned that when central banks step in, you follow the momentum. Brett does not know what a carry trade is. Brett thinks intervention means the chart goes up until he decides to sell. Brett's stop loss triggered at 2:00 AM while he was asleep. His broker sent him a margin call. Brett will not read it until Monday.
The yen is back to sliding because currency markets are slightly larger than the GDP of most countries and two central banks yelling very loudly changes sentiment for about as long as a earnings beat changes a stock price. Traders bought the news. They sold twelve days later. The chart returned to doing exactly what it was doing before anyone intervened. Every single participant learned a valuable lesson about the limits of monetary policy.
Just kidding. Brett's opening a new position tomorrow.
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