JPY Trading Outlook
USD/JPY The O/N rebound to retrace 50% of the 121.86-117.90 slide proved an opportunity for longs looking to get out amid broadening derisking flows. Tues's lows were finally breached late in the NorAm session, but stops below 117.75, and the 50% Fibo & weekly on-close pivot pt at 117.86, have yet to be triggered. The daily Kijun is at 117.64 and today's close will be well below the Tenkan at 119.80 for the 1st close below that feature since clearing it on Oct 20. N225 futures are -2.7% at last glance, Tsy yields are off about 4bp front-to-back and the oil-led carnage in EMs and other carry type trades are getting crushed, feeding back into covering of yen shorts. Even US shares are coming off fairly hard, adding more pressure to book profits on previously profitable trades as liquidity wanes into year-end. 38.2% of USD/JPY's Oct-Dec rise by 115.50 that's close to the lower 21-day Bolli, will be a prime target on a sub 21-DMA close. EUR/JPY also made a new intraweek low on yen strength that overrode profit-taking on short EUR/USD positions that look ripe for an oversold bounce off the up TL from '10 & 1'2 lows this week. MXN/JPY led the EM/oil cross carnage today.
USD/JPY This week's retreat from near the '07 highs in the N225 and USD/JPY today flushed out recent buyers of both, sending 1-mo vols surging to their highest since Sep '13 and above 12. Riskies swung back to a put bias for the first time since mid-Nov after reaching the highest call bias since May '13 last Thur. Sell stops were run below 119.15 (200-HMA, daily Tenkan & recent 50% Fibo) 119.32 (up TL off the Nov 10 7 27 lows) 119, 118.50 & 118. The 117.90 low was close to the 21-DMA and the weekly on-close pivot point at 117.86, the Nov 1 low. The worst of it was over by the Ldn close and prices then rebounded to between the 119.32 TL and the 119.55 Tenkan. A daily close below the latter would be the first since clearing it on Oct 20 at 106.97. That the recent uptrend was so deeply penetrated and O/B daily and weekly studies have rolled over from o/b readings suggests there could be more risk-off unwinding of longs here and in the crosses. But with 23.5b of 120 expiries ahead of yr-end, consolidation may suffice. GBP/JPY's collapse ended by the Kijun, EUR/JPY's by the 21-DMA: AUD/JPY is below both. New JGB yld lows despite the Fitch warning.
USD/JPY fell from a 7 year high of 121.86 in Asia, that being a vestige of the post US NFPs rally Friday. It became clear that once Asia had caught up to that news and was digesting unexpectedly bad Japan GDP and Tankan news, the new USD/JPY peak would not be retested this session, as Nikkei futures failed to make new trend highs and trended lower. US Tsy yields also fell, with a major curve flattening bias amid broader derisking and Fed speakers adherence to mid-2015 tightening window. With the EM meltdown on oil and a rising USD spilling over the DM equity markets today, the yen's haven identity came to the fore, taking USD/JPY back down to where it was before Fri's NFP surge. Prices pierced the up TL off the Dec 1 & 4 lows, then at 120.43, before finding support at 120.20. Most of the major option expiries into year-end are at or near 120, while the key daily Tenkan support is at 119.55 last. A daily close below there is needed to trigger a deeper correction. Speaking of Tenkan's, EUR/JPY's at 148.11 warded off today's 148.20 low. Thur's TLTRO results may add a new wrinkle for EUR/JPY. Hi beta crosses remain heavy on risk-off flows.
USD/JPY If USD/JPY bulls had any doubts about keeping, or even adding to, their trades coming into today's US Jobs report, they had none afterward. With the one caveat of a weak Household Survey, almost every other aspect of the Nov report was tailor-made to send Tsy yields and the USD higher. USD/JPY buyers made short work of 121.00 and 121.50 barriers, clearing the final 76.4% Fibo of the entire '02-'11 slide at 121.06 along the way. Offers at 121.70, that echoed ones at 120.70 earlier in the day, finally put a lid on the advance for the day as the Ldn week ended. There isn't much historical or technical resistance beyond some 122 expiries and barriers until the July '07 high at 123.67, the '07 Jun peak at 124.14 and the 161.8% Fibo-projected top derived from the Jun '13 low and Jan '14 high. 2-yr Tsy yields finally cleared the '08-'09 lows by 61bp that they had been capped by for the last six months, suggesting game-on for a few rate hikes in '15 & '16. Versus the BOJ's QQE2 and the lack of influence on JGB yields from rating agency downgrades, the c124 technical objectives look well within reach. EUR/JPY & GBP/JPY made new 6-yr highs due to heavy yen selling.
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