Interesting Pivotal Juncture for the 'Risk-off' poster boy.

During the entire period from 2007 to the present, the JPY has been the poster boy of the 'Risk-off' fraternity. Falling sharply from late 2007, trying to rally several times, but these ultimately fading away into a long continual downtrend which has ultimately seen it move from near 125.00 versus the USD to around 75.00, a drop of around 40% (or a gain if you were a JPY investor).  

There are signs however that USDJPY 'may' be basing. One has to be aware however; the world is full of traders with severely damaged trading accounts who have tried to call a base in the USDJPY over the past couple of years.

I am not going to go into detail in this at this stage, however I would like to present the longer-term USDJPY charts and highlight the pivotal nature of the current zone, in terms of major trend-line resistance at 78.70/85, which sits just above today's high at 78.66. - It is worth noting, the trend-line connecting the start of this decline had been broken in the past month, however the resistance line which is currently under threat may be more significant as it connects a number of key highs.  Also worth noting is that at the same level there is a minor line connecting a couple of significant highs from the past 6 months, giving this level a greater significance in terms of being pivotal. First attempts a key levels such as this may be repelled, but this is definitely a key level to keep an eye on with possibly deeper repercussions longer-term. . 

 

The deeper repercussions would be that a breaking of the trend-line may be a significant step on the way to a major change of trend in the USDJPY. This would not of course confirm a change of trend in itself, however, it could be an important event which could trigger some USDJPY buying activity, and longer-term could be a significant marker on the way to a major trend change. If that major trend change is occurring, does that mean that the risk-off mindset which has been the dominant feature since 2007 may be on the wane? The chart below highlights significant differences in the characteristic of the market in terms of USDJPY and SP500 in risk-on v risk-off phases, I know this is highly simplified, but it is nonetheless worthy of consideration going forward.