By now, most members are well-versed in the important role USDJPY plays in propping up equities. In fact, the yen carry trade is alive and well, and continues to rescue stocks on a daily basis.
In our last dedicated update in July USDJPY [see: USDJPY Reaches Critical Resistance] I noted that the pair had backtested the major channel which had guided it steadily higher since its 2011 lows and called for a backtest of the SMA200.
…the most likely course of action is a backtest of the white channel top and SMA200, ideally when they intersect a few months from now — but, sooner if SPX falters. The SMA100 and SMA200 will intersect in about a month, which is another legitimate target as that’s when SPX’s rising white channel encounters the Jan highs.
Indeed, USDJPY backtested its SMA200 five weeks later — the same day SPX tested its Jan high. We immediately looked to the .886 at 113.59 as our upside target. From Currency Complications:
USDJPY reached our target at the SMA100/SMA200 overnight, at least temporarily bringing the pair back below the top of the falling white channel from which it broke out on July 10…[it] is about to go on a market-ramping tear to 113.59…
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