It was August 2nd at the beach on a family vacation. I woke up around 4 a.m.
and as always the first thing I do is check the overnight futures quotes. S & P down 5.50% here, headlines of a Nikkei crash, and another great Yen carry unwind happening.
As calmly as I could I kissed the wife and kids goodbye and jumped in the car to get back to my trading desk as quickly as I could. I've seen this movie before. I traded for a hedge fund and served as senior technical analyst for an foreign exchange company during the great financial crisis of 2008 that saw a severe yen carry unwind.
As soon as I got home I looked at the so-called "yen crosses" to see how far they've come compared to 2008. I looked at the Nikkei that was reportedly down 12% intra-day, the worst decline since 1987. Here is that chart: To handicap this chart for you, here's a trick I used when I was starting out.
The blue line is USD/JPY and if the line is going up, the first part of the pair is strengthening relative to the second part. So with the blue line moving up USD is strengthening relative to yen. If the line is headed south the dollar is weakening relative to the yen, and the yen is strengthening relative to the dollar.
If you look at the severity of the 2008 decline in the USD/JPY exchange rate compared to now, it's not even in the same ballpark. In fact, just two months ago many were complaining that the yen was too weak and claiming a crisis is near when the rate was 165. Now, with the decline and USD/JP.