Japan Hiked and the Yen Fell

Oil and yields both backed off, and stocks had their best day in six weeks. Brent settled at $104.82, down from nearly $110 earlier in the week, and the ten-year fell to 4.93% from 5.01%. The Nasdaq rose 1.7%, with AMD up 6.4% and Nvidia up 2.5%. SPX closed 7,637.76, up 1.1% and only its second gain in nine sessions. Premarket 7,645, up 7.

Then Japan hiked overnight and the yen weakened anyway. The BOJ went to 1.25%, its highest since 1995, but two of the nine voted to hold and dollar-yen pushed past 157. Bessent spent this month leaning on Tokyo to hike and prop up the yen, and on September 9 dollar-yen sat at 153.46 with funds starting to unwind the carry trade. He got his hike and the currency's weaker than when he asked for it. Both hikes this week got the same answer from the long end, our ten-year down eight basis points after Warsh and JGB yields slipping after Ueda, and that isn't how a market scared of a long tightening cycle trades. The ten-year's back near 4.95% this morning.

It's also quad witching. More than half the contracts expiring today are AM-settled monthlies that settle at the open, so I'm reading only the PM contracts that trade through the session. Price is 5 over the flip at 7,640, right where the 21-day and the 8-week EMA sit, and positive gamma runs unbroken from 7,645 to 7,715. That band carries +9,335 into the 7,700 call wall, which means dealers are buying dips and selling rips inside it, and on an expiration day that usually ends in a pin somewhere between 7,670 and 7,700. Past 7,730 it thins out. Under the flip it turns negative fast, 7,625 the first real node, then the put wall at 7,600 with prior demand 7,598 on it.

The lean is long while 7,631 holds. The buy is a test of 7,640, with 7,670 and 7,698 for selling into. A close under 7,631 puts price back in negative gamma and turns the lean short toward 7,600.