The monthly chart  of USD/JPY (US dollar in Japanese yen terms or ¥ per $) illustrates a massive bear market (bull market in yen) which began in 1998 and ended during the 2nd half of 2011:

Click to enlarge

USD_JPY_Monthly_11.14.2014

Given that USD/JPY is referring to the Japanese yen price of the US dollar, rises in USD/JPY mean the yen is weakening and vice versa. Using a simple Fibonacci retracement drawn from the 1998 peak at 147.62 to the 2011 low as 75.54 we can quickly see that price spent a great deal of time working past the 38.2% Fib level at ~103 (support from 1999-2004 became resistance) before decisively breaking higher in September of this year.

The next major upside target is the 61.8% retracement at 120 which also happens to coincide with important long-term resistance. While the yen is rapidly depreciating (USD/JPY is rising), the 120 level should offer significant resistance and could even mark a key inflection point for the 2+ year old cyclical bear market in yen. Given that we are now at the 3-year mark from the 75.54 low in USD/JPY (October 2011) and cyclical bear markets typically last between 2 and 3 years, the next few months take on added importance.

It just so happens that gold peaked and US equities bottomed almost simultaneously with the USD/JPY bottom in late-2011. While the correlations often change every few years, it is clear that key turning points in USD/JPY mark key turning points for other major global asset classes such as equities, bonds, precious metals etc. In recent market history (the last decade) every major market turning point has roughly coincided with a peak or a low in USD/JPY:

USD_JPY,_SPX,_GLD

 (USD/JPY monthly chart with the S&P 500 above and gold below)

And if history is any guide a change in trend in USD/JPY will mean a change in trend for the S&P 500 and gold amongst other major asset classes. Investors' eyes should be focused on the USD/JPY 120 level as 2014 winds to a close...