USDJPY has pushed below pivotal support at 148.65 opening up the way for even lower levels. Next good support is at 146.95 (61.8% pullback) and then 144.13 (76.4% pullback)
This move is looking increasingly symptomatic of a risk off environment evidenced by what we are seeing in yields, equities and the Oil price.
In reality there is no reason we cannot go back to the Sept 2024 lows at 139.58 given the present yield and risk backdrop. In fact, even though it is only Tuesday we are already below the level needed (148.57) to see a bearish weekly reversal (if we close below here on Friday)
Even at this level USDJPY remains way too high relative to what the 5-year yield spread suggests
This as the Japan 10-year yield moved back up to 1.43% with major resistance above at 1.47% (76.4% pullback)
This as the Japan 10-year yield moved back up to 1.43% with major resistance above at 1.47% (76.4% pullback)
If that were to give way it would open up the possibility of a move towards 2%.
In addition, the Nikkei is also under pressure again
This move is also pressurising JPY crosses again. One of the more impressive charts in that respect is CNYJPY which has turned to form a double top off the 76.4% pullback level. The neckline stands at 20.41 with a break targeting as low as 19.17 which would take it below both the pivot off which the 76.4% pullback formed and the 200-week MA
All this in a background of falling US yields and a softening US equity market (Risk off)
Yields:
The break below 4.075% on the US 2-year yield still suggest a move towards 3.75%
The US 5-year yield broke below the pivot 3.99-4.00% level yesterday and no looks set for at least 3.85% and possibly 3.67% in this move. Over time even a return to the Sept 2024 low at 3.38% looks possible.
The US 10-year yield is hovering around good support at 4.14% and below here would open up a possible move to 3.88%
I still maintain a bis for the 2's 5's curve to bull flatten further before potentially morphing into a bull steepener.
FX
The USD is not really behaving like a "safe haven" currency despite the risk off environment and this morning is above a good pivot on EURUSD at 1.0533. A sustained close above here would suggest further gains albeit I am somewhat sceptical about the narrative here with European stocks having given up over about 2.25% this morning (SX5E)
Equities
US equity markets (and markets in general) remain under pressure.
Following triple negative weekly momentum divergence at the peak the S&P is in danger of completing a double top with a weekly close below 5,773 that would suggest further losses towards 5,450
It continues to trade in a fashion very similar to the last 2 weeks of July/first week of august 2024 that saw a high to low move of just under 10% with a big fall in the early days of august a as spike higher in the VIX
A move to 5,450, if seen, would be a high to low fall of about 11%
This as the VIX has completed a clear double bottom that suggest it could trade above 30%
Other US markets including the SOX (next good support at 4,270) and NASDAQ also look very shaky
The NDX has already completed the double top which if sustained suggests a move towards 19k
Commodities
Oil remains under pressure and my $66 to $67 target on WTI is now all but met. My concern now is that If we saw a break below the $63.64-$65.63 support area we could see this move extend further. falling Oil remains supportive of lower yields but it is now moving to a point that it could be suggesting an even more negative risk/economic backdrop is building
