Image Source: PixabayThis past week didn’t go as expected despite reserve balances falling to around $3.13 trillion. The JPM Equity Fund collar had too much of an impact, causing the index to get stuck between 5725 and 5750, preventing any meaningful breakout. That was one reason the market gave back all of its gains on Thursday despite the strong open. However, the collar will be removed on Monday, and a new one will be created, eliminating the mean-reverting forces tied to the 5750 level. This should also result in a rise in implied volatility, especially with the upcoming data being more crucial than ever. On top of that, Japan equity futures dropped sharply on Friday following the announcement of the new Prime Minister, who is expected to be more in favor of normalizing rates and pursuing a more balanced budget. The news came after the close of regular trading, with Nikkei futures in New York down about 6% by Friday evening.Japan’s market can be unpredictable. I’ve traded in Japan during critical moments, such as the financial crisis, the Fukushima disaster in 2011, and the election of Abe in 2012. The market can move quickly and take unexpected turns. So, while futures were down 6% in after-hours trading, I’m very curious to see how it unfolds, and I’ll be closely watching the market overnight—especially the yen. The yen strengthened materially as markets bet on the opposition leader winning the prime minister position, leaving them wrong. This led to the USD/JPY currency pair strengthening by 1.8% and the CAD/JPY by 2.1%. These were significant moves, and in the process, it appears that the USD/JPY pair fell back to its 20-day moving average and its 10-day exponential moving average. More importantly, it also seems to have broken below a bear flag, setting up a test of support at 141.85 and then 141. Once the 141 level is broken, the odds of a move down to 138 or so would increase significantly. The same can be said for the CAD/JPY cross, which appears to be on a short-term path to around 103, with the potential to head to the 100 mark. This has significant implications for US markets. If the USD/JPY pair heads toward 141 and the USD/CAD pair moves toward 103, it would mean that the USD/CAD currency cross weakened to 1.369 from its current 1.351 figure. This would suggest that the USD/CAD pair has potentially “bottomed.” As it weakens further, thus turning higher, it would seem to signal that the SPX may have put in a short-term top and is likely to move lower. This would also probably mean a higher VIX index, as the USD/CAD duo has a strong relationship with the VIX. By the way, the lines drawn in the SPX-USD/CAD chart above have been unaltered in the chart below for the USD/CAD pair vs. the VIX. Meanwhile, Nvidia (NVDA) will provide critical insights into market conditions this week. A lower Nvidia would likely indicate that the yen carry trade is unwinding. Nvidia has touched the upper trend line three times, and it is currently testing the 10-day exponential moving average. A potential touch of the lower trend line may come in at around the $111 level, which is something to keep an eye on. I also believe that Wingstop (WING) is another carry trade play, as the stock has mirrored shifts in the USD/JPY pair since October 2023. The stock appears to be forming a potential double top, with gaps to fill at the levels of $395 and $366. More By This Author:A Wave Of Volatility Is Poised To Hit The Market This WeekStocks Fall But Feel Stuck…For The MomentStocks Stall As Liquidity Continues To Be A Big Problem