We post daily and intra-day charts for USDJPY almost every day.  But, it’s been a while since our last look at the big picture.  Last December 4, we noted several approaching possible resistance levels.  The first was the approaching .618 Fib retracement of the drop from 147 to 75 between 1998 and 2011.

With USDJPY at 119.20 at the time, we’d know pretty quickly whether Leonardo Fibonacci’s observations would hold any sway.  We wrote:

With the end of the year coming up, I suspect we’ll see USDJPY barely pause at 120.11, but instead come back to backtest it — maybe even slipping below in the backtest.  Whether they can keep the scam alive after year-end, I can’t say.  But, there is little in the way of resistance [after 120.11] other than the top of the tight, white rising acceleration channel the pair has been in since early November.

Since then, USDJPY has pushed through 120.11 five separate times.  All but one of those times — the most recent — it fell back below, sending stocks scrambling for cover.

Oddly enough, the first came on Dec 5, the day after that post.  USDJPY shot up almost 2% through 120.11, closing at 121.44.  Over the next seven sessions, however, it fell 4.9% to 115.56. SPX followed suit with a 107-pt plunge that was then miraculously erased by USDJPY just in time for new all-time highs by year-end.

It was a sign of things to come.  The impact that each rise above 120.11 had on SPX:

1.  a 107-pt drop from 2079 to 1972 in seven sessions.
2.  fell 101 points in five sessions (and, marginally lower over the next two weeks)
3.  gained 52-pts (on oil’s bounce) but tumbled as USDJPY failed a second try
4.  a 30-pt slide on USDJPY’s pullback from the Fib and the red, dashed TL
5.  a 64-pt drop (when oil’s bounce failed)

This most recent push above 120.11 was arguably the most interesting.  With CL plunging back below the long-term trend line from 1998, it was only USDJPY’s spike higher that initially saved stocks from tumbling.

USDJPY even registered a new high on Mar 10.  But, it took seven sessions of closing above the white .886 Fib at 121.12 for SPX to believe it was for real and begin its latest recovery.  Yesterday, being an FOMC algo announcement day, USDJPY was used as a blunt force object to bludgeon oil prices back down.

When all the dust settled, USDJPY had fleshed out the bottom of its rising channel and managed to close back near 120.11.

Note that it closed today back above 120.11 — but, is running into potential resistance at the white channel midline.  Clearly, The Powers That Be understand the influence USDJPY — and, that .618 Fib in particular — have on stock prices.  As we detailed in Those Wacky Central Bankers, the yen’s demise has been essential to stocks’ rise since 2011.

We don’t know whether SPX can continue to notch new highs, because we don’t know how much pain the BOJ et al. are willing to inflict on the Japanese people.

They’re already reeling from tax hikes that are somehow expected to help revive an economy that’s been circling the drain for years.  If oil prices recover in the least, the “low inflation” deceit will be exposed for all to see.  What then?

The latest brainstorm out of Tokyo stems from the fact that, at the current pace of ¥3 trillion in annual purchases, the BOJ will have exhausted the entire supply of Japanese ETFs by YE 2017 (it already purchases all the bonds the government issues.)  Will they go so far as to buy up individual stocks, too?  And, will that be enough to sustain the carry trade?

Stay tuned.