As DXY closes in on our next downside target, it seems like a good time to check in on USDJPY.  In our last major update [see: April 3 Update on USDJPY] I tried to reconcile two slightly incompatible targets: the .618 Fib at 107.86 and the SMA200 (then) at 108.41.

There was a third potential attraction: a channel midline about halfway between them at 108.08.  And, there was another complicating factor: the falling channel USDJPY had been in since December didn’t reach any of those targets until later in the month, when their divergence would be even greater.

Sometimes, in charting, you have to squint your eyes and plop a target down where it comes closest to satisfying multiple, divergent objectives.  That’s what I did.

Either way, I expect it continue selling off to at least 108-109 with an eventual goal of the channel bottom around 105.33 – 105.60.

It turned out to be a nice call.  USDJPY reached 108.11 on Apr 17, meaning it tagged both the SMA200 and the white channel midline before reversing.  It spent two more sessions trying to regain the SMA200, finally doing so on Apr 20 and, then, breaking out on Apr 24.  I put an upside target of 113.50 on it, which it reached on May 9.

But, a funny thing happened at 113.50 — or, rather, didn’t happen.  USDJPY kept going, breaking out of the falling white channel and reaching 114.36 before it finally ran out of steam.

That was interesting; but, what was even more interesting is that the break out didn’t hold.  On May 11, with USDJPY at 113.808, we noted that it had started to break down.  It bounced sideways for a few days, then plunged over 2% today.With DXY having reached our next downside target, is USDJPY done?  Or, does it have further to drop?

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In our March 28 update on gold [see: Follow the Yellow Brick Road] I identified several upside targets that would be in play if GC was able to top its SMA200 — the first being the .618 Fibonacci retracement at 1280.80.

I reiterated it on April 11 [see: Price Alert on Gold] as GC spiked through the SMA200 and approached 1280.

The  purple .618 at 1280.80 was one of several upside targets suggested if GC were able to pop through the SMA200.  It did so once on Apr 7, but quickly retreated below the red TL from last July.  This breakout appears to have more staying power.

As it turned out, GC gapped through the .618 Fib the very next day and spent 7 sessions above it before running out of steam.  It ultimately broke down on May 3, but is at a very important threshold today.

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Lots going on this morning…with the key chart being the breakdown in the USD, which is approaching our target from May 1.Our downside targets from yesterday remain in force, and we remain short.

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In our last major update on the EURUSD [see: Nov 25 Update] I attempted to tie together currencies, oil and equities in one nice, neat package. My basic premise from that post:

• DX would top at our 102.098 target despite an imminent rate hike
• USDJPY would rally strongly into year end, despite the fact that DX was topping
• SPX would rally strongly into year end
• EURUSD, having shed 5.9% since our top call in September, would rally to 107-108

Things worked out pretty much as forecast.  DX reached our target (103.82), making no appreciable gains after the rate hike and well on its way to our downside target of 96.789.  USDJPY rallied 5.4% through the year end before topping out and beginning a 3.6% slide.  SPX gained 9% to new, all-time highs.

EURUSD was the one outlier.  It reached our target area in only two weeks’ time and promptly reversed below support.  This was not entirely unexpected, as there was some question as to when oil would top out.  I expected it to have an impact.

Suppose OPEC pulls it together and CL starts another leg higher now?  Stocks will soar, allowing USDJPY and DX to come back to earth.  EURUSD will rebound very strongly — not merely enough to prop stocks up for a month or two.  We’d likely be looking at a rally of several months.  Targets would start at 1.0756-1.0815 and go higher.

After hitting its upside target, EURUSD slumped below its Nov 25 lows, shedding 4.9% over the next several weeks.

It came within .0114 of our primary downside target (102.225, established in early 2015) before beginning a steady recovery that has seen it climb 7.5% from its lows.  We’ll look at why it couldn’t hold the December highs, why it fell short of our 102.225 target, and where it goes next.

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As expected, futures just joined SPX in making new all-time highs.  All it took was sneaking CL above its SMA200 and repeatedly hammering VIX below its SMA10.  Child’s play for central planners.But, in guarding against any declines, ever, they have run into some issues that might limit the techniques’ effectiveness going forward.  We’ll take a look, and update currencies while we’re at it.

Last week’s targets and caveats remain in place.

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Last week’s declining CPI should have sounded alarm bells for investors betting on the reflation trade and higher interest rates.  However, it marked a buy signal for oil.  Given that oil prices are a primary driver of equity prices, and given that the current YoY picture indicates even lower inflation going forward, it’s time for a boost — which is exactly what’s happening this morning.CL has made a strong move, pushing back above the SMA200 and white channel bottom in a 3.40% pop on news that OPEC hopes to continue “constraining” supply in an effort to reduce inventories and raise prices.

That’s all well and good.  But, the important thing is how the algos react. As the cash market prepares to open, the algos are liking the increase in oil prices very much.

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As we’ve expected, the whole rate hike argument collapsed this morning.  CPI, Core CPI and retail sales all missed.  The Fed will continue talking up the dollar, of course.  But, it isn’t looking good.

The US dollar is, predictably, tumbling — taking USDJPY along with it.After nailing our downside target yesterday and rebounding nearly all the way to our bounce target, equities are currently indicating a slight loss.

Only VIX, which is off 6.7% since reaching our upside target yesterday, and WTI, which continues on a suspiciously uniform rally, are keeping futures near even.

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See if you can spot the period during which the cash market was open in the USDJPY and WTI charts below. This one’s almost not fair, as VIX’s “breakdowns” have been as regular as clockwork.Now see if you can spot why the ramps happened when they did, and why our next downside target at 2383 isn’t such a problem for the bulls.  Below that…well, that’s a different story.continued for members… (more…)

While most pundits seem to be blaming Trump’s suspicious firing of FBI Director Comey for yesterday’s market slippage, the more important factor was USDJPY’s reversal late in the session.  It was USDJPY’s breakout that, along with VIX’s continued hammering, encouraged the latest all-time highs.  So, the fact that it ran out of steam at an unusual spot caught some by surprise.  It would have been surprising to me, too — except for the fact that the USD has run into formidable technical and fundamental resistance.

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We got new all-time highs as expected, yesterday.  Never mind that it took a breakout in USDJPY, a breakdown in VIX and a sharp rebound in WTI.  There’s even a clever bit of Fed positioning in the works for good measure.

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