USD/JPY: Conflicting Signals As SP500 Offsets DXY/US30Y

Whenever equities surge the way they did last Friday, under the current market regime, that’s always going to create a supply imbalance detrimental to the JPY. That’s precisely the reason why even if the DXY and the US long-dated yields keep dropping, the pair could find a floor around 110.25–30.I’d argue that as long as the weakening trends in DXY + US30Y stay the course, it’s going to take a lot of buying power in the S&P 500 as the barometer of the equity flows to prevent further cracks in the pair’s technicals. However, if we assume that the S&P 500 is safe to be ticked as a near-term supportive factor for the pair, any intraday recovery in either the DXY and/or US yields may see the propensity for trend followers to jump on the pair’s bullish bandwagon. If the S&P 500 doesn’t show abrupt moves in either side, this is a market where the most reliable cues will be obtained from the behavior of both the DXY and the US long-dated yields. Wait for both to align in the same direction. On the upside, the 50% fib retracement at 110.65–70, the retest of a prior support-turned-resistance at 110.85–90 ahead of 111.00–111.05 (round number + prior trend highs) are the key levels to watch. On the downside, 110.25–30 followed by 110.00–05 are the immediate hourly support areas.