The stronger yen in January and early February created the selling in the Nikkei and US stock markets to begin the year. The yen just received a spank down from the overhead resistance at 99, also the 200-day MA. Price violated the upper standard deviation band so a move back to the minimum should occur at a minimum, and did today with price at 98.0 for a low. A move to the lower band now at 97.41 and rising remains in play. The three red lines (negative divergence) create the smack down from the 99 resistance level but the RSI still had a little bit of juice for upside and did not yet reach overbot territory. Watch the RSI 50% level since below would lead to a further weaker yen which will fuel more upside for the stock markets and Treasury yields. Stock market bears and those looking for lower yields want to see the yen continue higher and break up through the 99 resistance.
The ADX shows the strong downtrend in place to end 2013 that fueled the higher stock market. The stock market selling in January was developing into a strong trend with the ADX heading higher, then, in early February, the ADX headed lower and is now in the cellar showing that the yen is completely trendless. It is not going up, not going down, simply floating along sideways. Interestingly, this may hint that the euro and dollar will become more important moving forward especially with Draghi poised to act in only 13 days.
The bull flag pattern is in play for the daily chart above. The first leg is 95 to 99, a 4 difference, then sideways consolidation with a slight downwards drift, then the second leg begins at 96 so the target is 100. The yen may stumble sideways for a couple days but the projection would be for a move higher to the 100 level to fulfill the bull flag. This would be in concert with the stock market drifting lower.
The XJY weekly chart is showing tight standard deviation bands with a huge move coming in one direction or the other so the current market action may be the calm before the storm. Over the next month, the yen is going either up to 103 or down to the low 90's. The direction should be apparent by the first week of June. The yen bulls (stock market bears) have a slight advantage with long and strong indicators. Watch to see if the RSI moves above 50% into bull territory, or not. Stock market bulls would want a bear flag pattern to occur on the weekly chart (red lines) but the indicators do not point to this outcome. The dollar/yen is hanging around at 101.90 so the stock market is higher. If the dollar/yen drops, the stock market drops; if the dollar/yen heads higher up over 102 the SPX will move up through 1900. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.