The present price action in USDJPY could not be any more similar to that seen after the peak and turn seen in July last year.
USDJPY then bounced 328 pips off strong support and the collapsed the following week as both equities and yields fell sharply. It has so far bounced 242 pips back to good resistance around 151
The big support level this time is 148.65
This week looks just like the week of 22 July 2024 when the S&P was in its second week of moving lower after a bearish outside week the prior week.
We just missed a bearish outside week in the S&P last week and are in our second down week.
In those 2 weeks in July the S&P fell high to low 4.9% compared (so far) to 4.7% this time before a 3-day bounce.
Then came another sharp move lower on the opening day of August. That saw it fall 8% in 3 days (01 to 05 August) for a high to low move of just under 10%.
In recent days I have been articulating that an increasingly bearish picture looks to be developing on Equities- with the Nikkei also breaking good support overnight. There is even a danger of bearish outside months on the NQ1 today (Below 20,694) and the NDX (below 20,538)
Less likely is Es1 which would need to fall below 5,809 on the close today for a monthly reversal.
However, the SPX has completed a double top which suggest a move to at least 5,710 with a bigger double top possible below 5,773
Bottom line:
I think US yields still head lower and in particular I am watching to see where the US 2-yearyield closes today. A close below 4.075% If seen, completes a double top that suggests a move towards 3.75%
In addition to the Equity developments above we have also had major breaks on the SOX suggesting it can go much lower.
If all of this is correct, then I think we can see a USDJPY move next week like we saw in the first week of August last year that saw it fall high to low nearly 800 points.
It may not be as big a move as that but i suspect it could be a move towards sub 147 with a possibility of sub 144 if equities really get hit.
Looks like a good recipe for low delta USDJPY puts or some put spreads
