Nikkei & JPY divergence

I was pretty aimless this week, a little unsure what I should discuss for this week's entry. 

While going through the forex pairs, I noted something interesting on JPY.

As I mentioned in Nikkei run away surge on 20th May 2023, Nikkei was surging upward. Further to that I also mentioned in EUR GBP comparison on 6th May 2023, both GBP and EUR were strengthening against USD. I also noted in Occult always lead to eventual collapse on 17th June 2023 that it was USD weakening against major currencies.

With Nikkei continue its uptrend, I would expect JPY to be stronger against USD.

Fig 1. Nikkei weekly chart

Since my last update, Nikkei made further progress and has in fact reached its 100% expansion level, coincidentally the double bottom objective. It is also at 61.8% projection of a its major trend, while 161.8% projection of a minor trend.

This week, I saw Nikkei retreated from its resistances. However, a single bar of reversal requires more development to determine its next destination. However, I suspect a potential congestion and possibly a retreat to its moving averages before heading higher.

the interesting part however, is the JPY.

Fig 2. USDJPY weekly chart

While Nikkei was on the rise, JPY continued to weaken against the USD. What does this mean?

It is really a question that I ponder because I am quite unsure. To me it is likely a sign of fund exiting the market cashing out utilizing the gain from Japanese stocks.

While Nikkei is seemingly reaching its objectives, the decline of JPY against USD has not.

It is only close to reaching its 61.8% of its expansion at 144.841 from its double bottom formation. It has also crossed its 127% projection at 143.176. 

If this trend continue, I will see resistances between145.4207 to 149.7654.

Is this normal?

To be more certain, it is good to conduct a comparison between JPY and Nikkei.

Fig 3. Nikkei - JPY comparison

Based on the chart in Fig 3, I noted relatively normal behavior of JPY - Nikkei relationship, until early 2022. while Nikkei seemingly still in congestion band, JPY strengthened against USD, which could be indication that fund being pumped into the market. 

However, when Nikkei began to surge by 2023, JPY started to decline against USD. This as I see is possibility of funds leaving the market as demand of JPY is on the reduction.

I suspect the Japan market is in process of distribution. 

However, I must make it clear here, this is only my speculation based on what I see from the chart.