JPY/USD has a strong negative correlation with the SPX.
JPY/USD has just completed a falling megaphone (red on chart) with an inverse H&S bottom that moved the price sideways across the falling megaphone before breakout. An inverse H&S is the classic way to complete a falling megaphone before a strong move upwards.
Now the yen has completed its breakout from the red falling megaphone, retested its top, and returned to its inverse H&S neckline, from which it pulled back on Friday (which is not unusual on the first breakout try).
To get back to the inverse H&S neckline, the yen broke out upwards from a two-month bottoming triangle at the bottom of its right shoulder. It didn’t just soar up there in a spike on some piece of news.
The yen falling megaphone and inverse H&S are a nice mirror of the SPX rising megaphone and H&S.
Now here’s the tricky part. JPY/USD has a double neckline on its inverse H&S–the purple one on the chart and the gray one. The gray one is the real one. The yen tagged the purple one on Friday.
Double necklines usually mean a megaphone right shoulder is going to form, roughly between the two necklines.
Megaphone, right shoulders on inverse H&S patterns tend to break out upwards just like any normal right shoulder.
The target upon a genuine breakout from the inverse H&S is roughly the level of the top touch on the top of the red falling megaphone.