Is the USD/JPY at Risk of a Rally?

Markets are worried about the idea that central banks have used up all available tools to keep rates low, and from current levels we may start to see them rise. The bond markets have sold off from the 30yr to 10yr Treasury’s, Bunds, etc. Global equities haven’t taken this idea well, and over the last few sessions the SPX (and other indexes) have been down quite aggressively.

Over the last year, I have been looking for a market where the USD/JPY stops selling off when US equities move lower. What you may notice below is that the SPX (blue line) has been moving lower the last couple weeks and the USD/JPY is holding well above 100.00:

What’s more convincing is that the 10 yr treasuries have been moving aggressively lower, and the USD/JPY has a very strong inverse relationship to bonds. In other words, as US yields go higher, the USD/JPY tends to follow. See below:

The USD/JPY has been in a strong down channel all of 2016, but a move above 103.50-104.50 may suggest this trend has changed and the USD is ready to rally:

Blake Morrow

Forex Analytix

 

Disclaimer: I am currently long USD/JPY, but may look to add in the coming session if criteria (as stated above) have been met.