The yen returned to favor against a basket of currencies in the Asian session. There were rumors that funds from maturing US Treasuries owned by the Japanese was going to be repatriated, resulting in yen buying. This, combined with Friday's sell off in US equities, has caused the yen to strengthen to 94.80. It looks like the uptrend line in place since early July has been broken. Is the yen telling us that the rally in stocks since the middle of March is about to end? The Shanghai stock index had its worst week since February, down 6%, suggesting that influence of the Chinese stimulus package may be waning.If we have a reversal in the USD/JPY, it looks like there may be more on the downside, perhaps to the 93/93.50 level. Should the market gives us a rally back to 95 today, let's sell the pair and put a stop above the down trend line at about 95.70.
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