USD/JPY: True Risk-On Depresses JPY Demand

One could argue that ever since the microflows in the SP500 and the DXY alienated back on Feb 8th in the late US session, that was the Intermarket milestone necessary to see the explosion of demand witnessed ever since. I’d personally argue, based on my own preferences, that unless I also see positive microflows in the US yields, I can’t tick all the boxes I’d like to see. That’s more prudence on my side. Anyhow, that was an occurrence that did also materialize on Feb 11th at the US open, allowing the pair to be propped up through the 110.00 round number into 110.60–65, where it’s been stabilizing now. In the last 24h, notwithstanding the loss of slope in the DXY (negative for USD/JPY), the upward micro slopes in the US30Y and the SP500 means the environment remains ‘true risk on’, and as such, this results in further residual demand entering this market even if the DXY weakens. From a macro perspective, while the DXY and the SP500 are both pointing higher, there is still some marginal gains required by US yields to turn its slope upwards even if a cross has already been achieved between the micro and macro lines (25 & 125-HMA). The outlook looks promising.