USD/JPY has stabilized after a steep fall this week, but it needs a reasonably firm finish today to right itself -- and that will depend on equities. Specifically, USD/JPY needs to close above the 112.27 low from two weeks ago to avoid a bearish reversal.
The last time USD/JPY finished a Friday beneath the low of the week preceding a trend-high week was November 17, 2017.
And the November 10 trend-high week kicked off a downtrend from 114.73 to this March's 104.56 low.
The November top was also accompanied by hefty net spec IMM long positioning.
Key now is whether this week's sizeable setbacks in stocks and other risky assets attracts buyers, which would be bearish for the haven yen.
A recovery in EM currencies, major equity markets and industrial commodities so far favors USD/JPY, with a stop below the 55-DMA or the uptrend line off the August and September lows, now at 111.54.
But a daily close above the 21-DMA, last at 112.95, is needed to reinforce a rerisking rally.