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.

If the pair can push through the SMA200, stocks should follow.  If it pushed up much at all, it will have broken out of a very old triangle and would have potential to at least the .618 Fib at 112.37.  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.

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.