Japan … August 3, 2026

Wow has there been a LOT written about the Japanese economy of late. It’s funny because I’ve been blogging about it for a while .. haven’t I? Again, NOT that I’m good at this (I’ve just survived), but the PATTERNS start appearing LONG before the main stream starts seeing it. A lot of time, especially on JC’s show (which I love doing – its a blast and he and Spencer are cool dudes), I’ll just keep my mouth shut about what the ramifications of a long term pattern may or may not be because then I act smart (note act) and really don’t know what I’m talking about … I’m just a pattern dude.

About 6 months I sent JC a chart of the pattern on the NI225. It blew right thru the pattern …I learned this from Mr Joe Dinappoli almost twenty years ago. What a great guy … salute Joe!

You project .618, 1.0 and 1.618 of your chosen swing. The COP, OP and EOP. Constricted Objective Point, Objective Point and Extended Objective Point. Quote: “I always take some or all profit at 1.618 ABCD.”

Folks – Nikkei has hit major resistance:

Here’s Claude (I’m not taking credit for it):

EWJ (iShares MSCI Japan ETF) is the largest and most liquid Japan equity ETF, giving unhedged exposure to roughly 200+ large- and mid-cap Japanese companies like Toyota, Sony, and Mitsubishi UFJ, with about $15B in assets. It’s important right now because it’s essentially a leveraged bet on both the yen and the BOJ’s policy path: the BOJ hiked rates to 0.75% in December 2025 — a 30-year high, signaling the real end of Japan’s deflation era — while the yen has weakened against the dollar through much of 2026, which acts as a headwind for unhedged holders like EWJ even as it helps Japanese exporters’ earnings. Because EWJ carries no currency hedge, it moves with both Japanese stocks and the yen itself, making it a direct way to trade the current BOJ-normalization/yen story rather than isolating pure equity performance (that’s what hedged alternatives like DXJ or HEWJ are for).

Here’s a chat of YCS above – I only chose it because it’s another YEN/Japan security story – seriously. I was just hunting for patterns.

Claude Sayeth:

YCS (ProShares UltraShort Yen) is a leveraged inverse ETF designed to deliver -2x the daily move of the yen versus the dollar — so it gains when the yen weakens and dollar strengthens, and vice versa. It’s a small fund (~$30M AUM) built for short-term tactical trading, not buy-and-hold, since daily rebalancing causes returns to drift from the 2x target over longer periods. Right now it’s relevant because USD/JPY is trading around ¥163-164 with the dollar continuing to grind higher, meaning yen bears have been getting paid, though recent outflows suggest some traders are starting to trim yen-short positions after that run.

Worth flagging since you’re clearly building out FX/Japan positions: leveraged inverse products like YCS carry real decay risk if held beyond short trading windows — not investment advice, just something to weigh given how they’re structured.

Here’s where YCS is as of today:

So, that’s 3 SELL PATTERNS on ‘equity like’ instruments. Meaning: they should have hit strong resistance and are correcting as expected. Major top or just a correction .. folks, that’s TBD w/ all the FX moves going on. The area of resistance that they have all hit make sense from a pattern recognition perspective.

Now, how about the YEN?

Claude:

AUD/JPY tells a simple story: Australia sells the world (especially Japan and China) huge amounts of coal, natural gas, and iron ore, so when the global economy is humming and factories need raw materials, demand for those commodities rises, Australia’s dollar strengthens, and AUD/JPY climbs. On the other side, Japan has almost no interest rates, so traders love to borrow cheap yen and use it to buy the higher-yielding Australian dollar — a bet called the carry trade — which pushes AUD/JPY even higher as long as things stay calm. That’s why AUD/JPY acts like a mood ring for the world economy: it goes up when people feel confident about growth and commodities, and it can crash suddenly if Japan intervenes to strengthen the yen or if fears about a slowdown make traders rush to unwind those borrowed-yen bets all at once ….

Me: is it breaking out from a decades long base? If not this time, after a little pullback? I see a mirror image foldback that forecasts the entire left side of the chart – going right to left. Go see the Silver Mirror Image Foldback on this blog …

I’m too lazy to plot it, for now, but I see a pretty nice mirror image foldback PATTERN that I will, one day, if I have time, teach and active inference AI agent to see and calculate the planetary harmonics which are creating the near perfect ‘mirror image’ for price from one point .. kind of like 1776 and 6771. I digress. I’m walking back UP (key word choice) the left the side of the chart so, while I see a pullback coming, the trend, in my humble opinion, is UP. I’ve never lived thru the breakout of a 30 year base- perhaps I’ll see it? 🙂

Claude:

EUR/JPY works a lot like AUD/JPY, but instead of tracking commodity demand, it tracks the interest rate gap between Europe and Japan: since the ECB now pays a decent interest rate (around 2.4%) and Japan’s rates are still near zero, traders borrow cheap yen and buy euros to pocket the difference, pushing EUR/JPY higher as long as that gap stays wide and markets feel calm. But the pair is also a stress gauge for global energy risk, because Japan imports over 90% of its oil through the Strait of Hormuz, so tensions there (like the current US-Iran standoff) can rattle both the yen and broader markets at once. Just like AUD/JPY, EUR/JPY can drop fast if Japan intervenes to boost the yen or if fear spikes and everyone rushes to unwind those borrowed-yen trades at the same time, so it’s another mood ring — this time blending Europe’s interest rate story with Japan’s energy security worries.

Folks, would you look at that? Right at the 50 percent retracement from the all time high and a true breakout of a channel and horizontal resistance (guess I can see why they are intervening) so that ‘should’ act like as pretty big support. If it doesn’t, woah boy. Watch the red horizontal ‘support’ line -that’s the key. It’s definitely going to be interesting to watch the reaction off the multi decade top channel … hmmm.

Pound / Yen – largest corrective moves every in the down trend complete …

Claude: GBP/JPY is another carry trade pair, and actually the biggest interest rate gap of the bunch: the UK pays around 3.75% while Japan is still near 1%, so traders borrow cheap yen and buy pounds to pocket that 275-basis-point difference, which is why the pair sits so high (around ¥210-215) and earns its nickname “the dragon” for how wild it swings. That size gap makes it extra sensitive to shocks, so when fear spikes or Japan intervenes, GBP/JPY can drop 3-5% in just a few days as everyone rushes to unwind those borrowed-yen trades at once — it did exactly this in the August 2024 yen flash crash. So think of GBP/JPY as the most extreme version of the story: bigger reward from the rate gap, but bigger risk when the carry trade unravels.

Certainly like we have technically hit some BIG levels so … for me, now I just wait and see as somethings gonna give … go w/ that flow and it certainly doesn’t appear to have been a bad bet to go where the fed does it betting now does it? Now, that being said, don’t think for ONE MOMENT that he didn’t know that his famous scribbling about Yen wouldn’t be seen by everyone – come on. So, that’s why, for now, I’ll keep watching the commodities and also just waiting to see which way she goes and then simply go w/ the flow.

I believe the 100-101 on the long bond is a KEY to his entire mystery: