Update on USDJPY: Sep 13, 2017

I update the USDJPY charts every day, but it’s been a while since we last took a look at the pair from 30,000 feet.  In our May 17 Update, we noted it had rejoined its well-formed falling white channel and was headed for a tag of the rising white channel bottom — though there were important interim Fib levels with which to contend.

Otherwise, the downside targets originally contemplated are all in play: the red .618 at 107.86, the purple .618 at 106.50 and the red .786 at 104.92.

It turned out that breaking out of the falling white channel was a pretty healthy development for stocks — so much so that it did so again, and again, and again.  Not that there is such a thing, but it probably set a record for backtesting a channel.

The net effect was that the rising white channel tag was delayed, coming in at a much higher price than if the falling channel were allowed to play out. The original intersection of the two was mid-late July.Thus, even though USDJPY registered new lows, stocks were supported in setting new all-time highs.

USDJPY came within 0.81 of our 106.50 target last week, and has since rebounded sharply.  Is the worst behind us, or is there more downside ahead?

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