JPY Trading Outlook
USD/JPY Selling in USD/JPY ran out of steam in Asia as longs taken ahead of Tuesday's Yellen appearance had been flushed out and importer/spec bids ahead of the converged 21-DMA and Kijun at 118.57 reversed the tide. The NorAm recovery got a few stops above the tenkan by 119, but without a good reason from US data or round II from Yellen, 119.07 all that could be mustered. Reports of a Japanese pension fund following the GPIF portfolio reallocation lead may also have helped weaken the yen a bit. Word on GPIF allocations at end Dec may be released before the week ends, providing more clarity on how far it has come in its reallocation process (basically out of JGB, into stocks and foreign assets). EUR/JPY was slightly former, though better gains were in the higher beta yen crosses, particularly AUD/JPY. It finally broke well beyond Kijun & Fibo hurdles by 93.35 and is pressing the down TL off the Nov & Jan highs at 94.02 last. GBP/JPY is also looking bullish, with a close above the 61.8% of the Dec-Feb slide at 184.23 a good prospect today. Weekly JPY investment flows are out tonight. There is a slew of key JPY econ data out Friday & a Kuroda speech.
USD/JPY High hopes that Fed Chair Yellen's testimony would at least moderately reinforce the notion of tightening finally beginning midyear had sent USD/JPY to a fleeting intraday peak of 119.84, only to have prices implode when it became clear she was intent on not boxing her or the Fed into any tightening timeframe. Tsy yields tumbled, dragging USD-JPY 2-yr spreads to their lowest since Feb 6 and USD/JPY all the way down to Monday's 118.75 low. Prices did, however, manage to hold above the 55- & 21-DMAs at 118.71/51, as well as the daily Kijun at 118.56. The net change on the day is negligible, due to the Fed Chair's noncommittal stance. The implied yield on the June Fed funds futures contract is 15.5bp and only about 1.5bp less than Monday, though yields further out the curve were 4-6.5bp lower, in part still working off some of the outsized rise in rates that followed the Jan NFPs report. Exporters remain happy to fade rallied toward 120 and 1-mo vol has sunk back to the Feb 5 nadir of 9.2. Daily Cloud twists Wed, with the base rising to the key 118.10 support level. There's a flurry of US & Japanese data on Thur & Friday, along with more Fed speak.
USD/JPY was one of least interesting yen pairings today as traders braced for tomorrow's testimony by Yellen and got only soft, but second-tier, US econ data to chew on ahead of that. BOJ Minutes and Abe advisor comments bolstered the notion QQE2 will be left alone for the next few months at least. Meanwhile, the steady erosion of the net spec short JPY positioning the past few months is being largely offset by Japanese pension demand for foreign assets, led by GPIF. EUR/JPY gave back a big chunk of Fri's whiplash recovery gains on Greek hopes. The reality of the Greek extension is less glamorous than some had perceived it to be on Friday. The next chapter in this drama was delayed until Tues, when the Greek govt is to deliver its new "letter" to the troika a day behind the new schedule. The two sides have until the end of April to sort it out. GBP/JPY shrugged off poor CBI data to reach a 184 high, just shy of the 61.8% of the Dec-Feb slide at 184.24 that has capped Feb rally attempts thus far. CAD/JPY and other commodity crosses got a fleeting lift on an FT story about a potential emergency OPEC meeting. Fri is the next big Japan data day.
USD/JPY The yen largely followed the risk parade today, which went from off to on as the NorAm session got underway and indications from Greek bailout extension talks were that a deal was in the making. As we near the end of the week, the reports of the deal being done have become more definitive and EUR/JPY is at its session highs close to Thur's 135.92 high vs a NY morning nadir at 133.56. The focus now is on the Feb high at 136.70 by the upper 21-day Bolli. USD/JPY had run small sell stops below 118.40 in the NY morning, when risk was off, Tsy yields were near their lows and the N225 futures had slipped from o/n highs. But reports of progress toward the Greek deal chased USD/JPY back above 119 and N225 futures to fresh trend highs. In the end, USD/JPY has trod over roughly the same ground for five consecutive sessions. Key supports are between 118.05 and 118.17 from the Kijun, 61.8% of the Feb range, the Feb 16 swing low and the daily Cloud top. While above there the trend remains nominally higher. AUD/JPY used the risk-on vibe to make new highs for the week above 50% Fibo & Kijun hurdles. Heavy JPY data slate next week.
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