JPY Trading Outlook
USD/JPY The expected qtr-end and overbought consolidation of the USD/JPY uptrend persisted on Wed. Japanese exporter offers were touted by Wed & Tues's 104.16-17 highs along with light long spec profit-taking in the absence of fresh US news to goose prices higher. Few are willing to take on the 104.50 option barrier that stopped Monday's rally in its tracks at 104.49, at least not before getting a bead on key Japanese and EZ econ data due out at week's end. Friday will also bring US regional PMI results for Aug as a leading indicator for those timing Fed policy normalization. A Reuters poll shows the mkt split on whether the BOJ will up QQE this year. Bids are into Tues's 103.75 low and mixed by Monday's 103.50 low. 38.2% Fibo & daily Tenkan support are at 103.35/31. Yen crosses were mostly firmer, but Tues's EM rebound fizzled, while the dollar bloc sizzled, namely CAD, Kiwi and Oz. CAD/JPY surged beyond its weekly Cloud top at 95.90 for a 95.96 high. July's tries at a weekly closes above the Cloud top failed, so all eyes are on that going into Friday. New low for the week in EUR/JPY below the daily Kijun, but not a close below there yet.
USD/JPY Asia dumped USD/JPY, but the break below Monday's lows and assorted hourly chart supports quickly attracted dip bidders late in Asia and then in Ldn and NorAm trading. Demand grew in NY after assorted 2nd-tier US data releases beat expectations. Dip buyers are running into a bit more long USD profit-taking 104+ as month-end nears and as prices remain o/b. Today's high failed to clear the upper 21-d Bolli after being above it the preceding four sessions. Nevertheless, today's long-legged Candle shows demand is brisk on any discounts. 104.50 barrier defenses linger, along with this year's 105.45 high & the 61.8% of the '07-'12 slide at 105.49. There is a slew of Japanese data out Friday into mo-end, an event that would normally argue for bulging long USD positions being pruned. EUR/JPY clings to support by 137 amid speculation Draghi's JH speech will be a precursor to fast-tracking of ECB QE, beginning with already touted ABS, though the amounts there are modest at this stage. EZ CPI is also out this Friday and will tend to intensify or reduce talk of more easing at the Sep 4 ECB. The BOJ is seen steady at least until Oct.
USD/JPY The vast majority of the day's USD/JPY range had already been carved out by the time NY opened. Prices gapped up in Asia to 104.49 before running into offers ahead of 104.50 barriers. From there prices drifted back to NY afternoon lows from Friday (post Yellen and Draghi speeches) by 103.85. A soft US New Home Sales report put a quick end to a muted intraday rebound. Kuroda's speech Saturday maintained his pledge to forge ahead with QQE for as long as it takes to get wage-driven inflation well established. But with the USD/JPY heavily o/b coming into a holiday-thinned week with ltd data and prices within one yen of this year's 105.45 peak and 104.59, 61.8% retracement of the pre-post crisis slide, the urge to book some profits while awaiting breakouts above those hurdles is not insignificant. That urge would become more of a purge if prices were to fall below the 100-HMA & hourly Cloud base, last by 103.73. That Cloud base rises to 103.95 tonight, pressing prices to either resume their rise or correct. EUR/JPY was again rejected near the Aug 1 high on ECB QE, IFO & Ukraine concerns. July Corp Service Prices from Japan are out tonight.
USD/JPY With help from a USD-bullish interpretation of Fed Chair Yellen's JH speech and higher Tsy yields, USD/JPY cleared its Apr peak at 104.13 and the offers by 104. But both USD & Tsy yield gains receded in the afternoon, dragging USD/JPY back down to around unchanged for the day. Bidders noted at 103.50. With daily RSI in the 80s, prices spending much of the last three days trading above the upper 21-day Bolli band and historically elevated short spec yen positioning, some pre-weekend pullback was always a risk, if countered by de rigueur dip-buying and a lack of serious exporter selling pressure. Just as ECB's Draghi noted that the EUR should weaken further as a result of diverging ECB & Fed policies, the markets also assume that the Fed-BOJ contrast and no serious political pushback against QQE mean this year's 105.45 peak remains in play. There was a modest setback in the N225 futures and other equity indices Friday, but not enough to seriously undermine the USD/JPY's risk-related bid. EUR/JPY consolidated gains after hitting 138 & offers just ahead of the Aug 1 high, while AUD/JPY retained its post-breakout gains into the weekend.
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