Keystone got a tattoo yesterday. It appears across the neck and reads, "The Central Bankers Are The Market" with the 's' in bankers on top of the Adam's apple. A weaker yen (XJY) corresponds to a weaker yen against the US dollar which drives the USD/JPY pair number higher. The yen is in the denominator of the USD/JPY ratio so as the yen weakens the USD/JPY moves higher and visa versa; a stronger yen will send USD/JPY lower.
Each time the yen weakens, i.e. the USD/JPY currency pair rallies, the US stock market rallies (green). When the yen strengthens, USD/JPY trails lower and stocks drop (red).
The Federal Reserve and BOJ comingle in bed each evening which guarantees erect markets the following morning. Central bankers make the world go 'round. The central bankers are the market. Kapish?
Thus, as we await the Godot Top to appear for the US stock market due to the rampant complacency and bullish euphoria, a stronger yen (USD/JPY moving lower) will likely occur to pave the bearish path lower. The chart indicators for USD/JPY are mixed. The RSI is in neggie d, ditto the histogram and the stochastics are overbot; all bearish factors. However, the MACD line remains long and strong as well as the stochastics; bullish indications. The MACD may require a jog move in price, down one week, up the next week to the same highs, to create negative divergence and the top in dollar/yen. That would be the top on this weekly basis.
Watch the RSI since it if curves any higher, that will extend the move higher in USD/JPY for a couple more weeks. The purple rising wedge pattern is very bearish for USD/JPY price once it begins dropping. USD/JPY sits exactly at the 100-week MA at 109.61-109.63 and needs to make a bounce or die decision. As this message is typed, the dollar/yen is printing at 109.49 so it is losing its hold on the 100. The 50-week MA support is at 109. If this is lost, the stock market will be in trouble.
Standing back away from the charts, you see that dollar/yen and yen are chopping generally sideways over the last couple years but US stocks are continuously moving higher now in a parabolic melt-up. Equities may be out over their skis.
The direct relationship between yen and stocks is obvious. That is why Governor Kuroda is on speed-dial with Chairman Powell. Note the two purple boxes for the ADX that show that the strong trends over the last couple years correspond to the falling dollar/yen currency pair (stronger yen). It is only the collusion of the Fed, BOJ, ECB and other global central bankers that have saved markets via their Keynesian games.
The dollar/yen chart probably needs two weeks to top out although a move down is needed right now due to the negativity in the indicators. Thus, the stock market may sell off say 50 SPX points as the dollar/yen pulls back for a few days (a week) but USD/JPY should then rally for another week or two after the short pullback to provide time for the MACD line to go neggie d. That will be the top on the weekly basis, that is, unless the whole shooting match collapses before then. 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.
Note Added Tuesday Morning, 12/31/19, at 7:50 AM EST: US stocks sink lower in the Monday session. The dollar/yen pair is trading at 108.53, a 108-handle. USD/JPY loses the 50-week support, which now becomes resistance, and price sets its eyes on the 200-day MA support at 108.75, which now also fails and becomes overhead resistance. If 107 is lost, it is lights-out time.
Note Added Wednesday Morning, 1/1/20: Happy New Year. Dollar/yen 108.60.
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