USDJPY’s Big Day

USDJPY, having dutifully provided yet another overnight ramp job for ES, pushed up to tag the SMA200.  Note that the daily averages are still in a bearish alignment, though the 10 (red), 20 (gray) and 50 (blue) have recently curved up.

140729_072038_CQG_Integrated_Client_Chart_USDJPY_-_Japan_(Yen)_Daily

If the pair can push through the SMA200, stocks should follow.  If not, the “market” is long overdue for a breather.  The last time USDJPY reversed off the SMA100 (July 3) and fell through the SMA200, SPX swooned by 33 points — a calamity by today’s Fed-inflated, volatility-deprived, algo-driven standards.

2014-07-29-USDJPY daily MAs

The BOJ and algo houses have propped up the USDJPY for months — particularly post May 2, when the rising white channel officially died.  The BOJ sees a lower yen as the key to increasing exports.  But, inflation is getting out of hand — killing off consumer spending at a time when tax revenue is sorely needed.  Algos use USDJPY as the basis for the largest carry trade out there — probably in the hundreds of billions if not trillions.  The cracks are starting to show.

2014-07-29-USDJPY daily Chnl

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