The wolf arrives
An Englishman, a Frenchman, a Spaniard and a German are sitting in a room when a man enters and asks:
“Can you see me?”
They respond:
“Yes.” “Oui.” “Sí.” “Ja.”
highlights
Final Warning
Current Views
Limit orders to sell USDJPY rally 157.20 157.40 157.99
Stop loss if done: 160.11
Short USDCHF vol exp. today
Sell put spread: 0.7800/0.7780
Sell call spread: 0.7860/0.7880
Risk 1 to make 1.1
Need USDCHF below 0.7860 at 10 a.m. for full profit
JPY
In the story of The Boy Who Cried Wolf, the wolf eventually comes. And he arrived today in the form of a massive push lower in USDJPY. It is an interesting intervention decision because it comes purely on the back of the level of USDJPY and not the speed of appreciation. This is different from past interventions which were triggered by a combination of level and rate of change. So that changes the calculus going forward and creates a bit of a brick wall at 160.00 now.
The standard max move on USDJPY intervention is 3% to 3.5%, which would put the low today around 154.60/155.00 at the extreme.
From a trading point of view, it’s way too late to sell USDJPY here as a majority of the short-term move has already happened. There are some good trades to do on a rally. Trades that play for the truncation of the right tail as it’s clear this is a story about levels, not rates of change. At 157.50, for example, you can most likely sell a 3-month 161.05 one touch for about 50%. That will carry nicely as USDJPY is either going to fall or consolidate after this intervention.
Looking at the market picture will give you a good sense of where there has been price action and where there has not. If you want to sell a rally, look to sell 157.20/40 ahead of the last single print or if you are incredibly patient, sell 158.20. I am going to leave some orders just in case we get up there (see sidebar for details).
The USDJPY selling has flowed through in a mechanical way to other G10 FX with USDCHF and EURUSD moving in sympathy. The intervention should establish a new 154/159 range for USDJPY but the impact on other G10 pairs tends to be limited in scope because cross/JPY bears the brunt given it’s a JPY thing. In other words, MOF intervention is not a reason to go short USD across the board.
Butterfly Effect
Oil and USDJPY have been strongly correlated of late and it’s interesting that oil seems to have dropped in sympathy with USDJPY, even as the rhetoric from the Middle East looks worse, not better.
Veteran traders might remember a day way back in 2015 when Stephen Poloz surprised the market as he decided not to cut rates and CAD and oil and S&P’s all ripped in sympathy, with oil following CAD and everyone in the market screaming whatttt???
Here’s my writeup from that day.
Why would oil drop just because USDJPY drops? The standard explanation is that traders have similar exposures in correlated products. If you’re playing for higher oil, you are probably short JPY and when you are getting smoked on the JPY side, you sell your oil futures. Or, Japan is intervening in crude futures? Hard to say, but this happens often and it’s not random. Regardless of the reasons, we now have a Slingshot Reversal in Brent Crude (bearish).
You could reasonably go short oil here and stop out at a new high if you believe that price leads narrative (I do). It’s a super interesting reversal in crude as the newsflow does not support it whatsoever. Should be good for Russell 2000 and stocks in general as the AI Capex story shows no signs of slowing down after last night’s quadruple earnings drop.
And if that was not enough. Magazine Cover Capital goes short oil. I will update and send the spreadsheet tomorrow.
Seasonals for May
As promised, here are the seasonal signals for the month ahead. For a backgrounder on seasonality, see here.
Seasonals are the kind of thing that give you a lean. A probabilistic edge. They have been performing very well in 2026 and did well in 2023 and 2024. They did not perform well in 2025, but overall, the statistics are hugely compelling and all out of sample as the signals are published in October of the year before.
Final thoughts
Maria came from Nashville with a suitcase in her hand
She said she’d like to meet a boy who looks like Elvis
And she walks along the edge of where the ocean meets the land
Just like she’s walking on a wire in the circus
She parks her car outside of my house and takes her clothes off
Says she’s close to understanding Jesus
And she knows she’s more than just a little misunderstood
She has trouble acting normal when she’s nervous
An Englishman, a Frenchman, a Spaniard and a German are sitting in a room when a man enters and asks:
“Can you see me?”
They respond:
“Yes.” “Oui.” “Sí.” “Ja.”
