JPY Trading Outlook
USD/JPY Profit-taking on short yen trades was widespread Tuesday, as crowded spec trades come in for corrections ahead of the holidays and year-end. AUD/JPY led the descent and is flashing several sell signals heading into the day's close. For a change, even USD/JPY gave up some ground. The dollar generally looked wanting after an unexpected upward revision to US GDP failed provide the it with lasting support. USD/JPY initially popped to 118.29 on the release, but quickly fell back as Tsy yields remained soft and N225 futures were unable to improve on their London highs. A weak Consumer Confidence report reinforced the profit-taking in long USD positions, though the 117.69 o/n low remains intact thus far as trading interest wanes ahead of the NY holiday on Thursday. Unless there is a wash-out in risk, something the AUD/JPY is intimating, USD/JPY downside will be ltd by QQE2 and GPIF flows. EUR/JPY was rescued by a squeeze up in EUR/USD when Monday's double-bottom couldn't be threatened after the US GDP beat. Daily Tenkan at 146.35 offered support. Dailies are wobbling, but the uptrend's intact while closes are above the Tenkan.
USD/JPY stops were run below 118 in Asia, only to have buy stops run above 118 ahead of the NY open. USD/JPY rallied to a 118.485 session high by the middle of the NY morning, with talk of real money buying underpinning the move. There is every expectation that GPIF et al will resume their foreign asset buying after a lull the previous week. Below f/c US data, second-tier as it was, kept USD/JPY bidding contained. Japan returns from holiday tonight with a bang. BOJ Minutes and a Kuroda speech/Q&A should provide some interest, though after the 8/1 vote at the last meeting we doubt any sea changes will be revealed. The focus now is how Abe's coalition hold up in next month's snap election. In the interim, QQE2 and GPIF reallocation will keep the yen a favored sell, particularly vs the USD and any others with CBs not on the cusp of aggressive easing. 119 remains the topside pivot for USD/JPY. Light stops are set above 118.50. EUR/JPY is technically top-heavy after Friday's bearish close. Today's 147.32 high is by the hourly Cloud top and 50% of the 149.12-145.59 slide.
USD/JPY bulls survived the Aso comments (about a too-quick yen depreciation) with minimal damage as the Wednesday post-FOMC lows at 117.35-40 held a couple of attempts to break it lower. All the action was in EURJPY, which goes into the weekend with a tenuous grip on the 200 hma. Stocks rallied hard, including the Nikkei, after the PBOC rate cut but save for AUDJPY the major yen pairs didn't follow suit. The short yen trade feels tired and we wouldn't be at all surprised to see some position squaring in to a holiday-shortened week. Through USDJPY 117.30 and/or EURJPY 145.75 will generate some follow through selling.
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