JPY Trading Outlook
USD/JPY Stronger-than-expected US Claims and IP data gave USD/JPY, and most other yen crosses, a lift up in NorAm trading. The rebound was fairly subdued compared to recent losses, in part because Tsy yields and stocks gain little traction on the news. The IP was less impressive than the headline due to surges in Utilities and Mining, while NAHB and Philly Fed were poor. There is also the matter of what the market wants/fears most at this point. Is good US news good for the USD and bad for the yen because the US could help the rest of the world recover, or is it bad news because it keeps Fed dots in place, risking further financial upheaval. Careful what you wish for. Meanwhile, BOJ's Kuroda has again voiced his approval of a weaker yen if fundamentals justify it. The angst at the ECB and EU is thickening. USD/JPY has managed to hold above the daily Cloud at 105 that real money and Japanese buyers are reported bid in front of at 105.20-00. But today's rebound is so far stalled by the o/n & late NY Wed highs in the 106.30s. The crosses all rallied hard on the upbeat US data, but p/t was integral there. N225 by its up TL fm Jun 1'3, last at 14,628.
USD/JPY Big expires at 107.00/20 in NY were no match for USD/JPY selling pressure generated after US Retail Sales, Empire & PPI were all weaker than forecast and another Ebola case was confirmed here. Tsy yields disintegrated. 2-yr Tsy yields were down over 13bp at one point and only 4.3bp from the 2013 low of 20bp. 1-month vols surged to their highest since Feb. Sell stops were run under 106.65/50/00 and 105.50, but macros began an intraday rebound near 105.20 that retraced half the day's slide before selling resumed. The daily Cloud top will be at 105 Thur to make that level even more pivotal. Talk of Japanese corporates also keen on 105 support holding. N225 futures are down 1.74% at this writing, but are -10.45% on the year in a clear affront to Abenomics. GPIF independence the talk o/n, but global deleveraging is making being long the Nikkei or short the yen a tough call now. A moderate Beige Book and talk of Yellen being reasonably upbeat on the US economy haven't done much for USD/JPY or risk sentiment. EUR/JPY's threatening a weekly Cloud break; 135 pivotal. GBP & CAD heavy losers to the yen today. No Japan data tonight.
USD/JPY traded almost purely as a derivative of the S&P during the NYC time slot, lagging well behind other dollar pairs as yen remained in demand, especially on the crosses against EUR, GBP and AUD. All three crosses are at or near the lows of the move and reflect wariness about the state of carry trades despite the feeble attempt of major stock markets to bounce. The early London highs at 107.30-35 will serve as a pivot point with yen bulls determined to use the ongoing weakness in the Nikkei to press their advantage. USDJPY 106.80-107.00 represents the 40 dma (106.88) and the liftoff point for the pair after the Fed's Sep 17 meeting and is a key hold for the yen bears.
USD/JPY Despite a feeble mid-day attempt to rally (along with stocks) USDJPY remained heavy under the weight of sharply lower US short rates and a weak Nikkei. Fed Vice Chair Stanley Fischer joined the chorus of worriers at the weekend's IMF meeting, suggesting that rate hikes are further off than currently expected. Yen was quiet in NYC despite the fact that Nikkei futures are being hammered below 15k (-2.6%). Bulls are trying to hold 107.00, which was roughly where the pair was on Sep 17 when the Fed ratcheted up the Dot Plot and sent the USD on a run higher. Technical support in major equity indices is falling and will create a demand for yen as carry gets unwound.
USD/JPY A bit of calm returned on Friday after Thursday's somewhat angst-ridden asset liquidations that lifted the yen broadly, but far more so on the crosses. As a result, USD/JPY prices managed to tuck themselves inside Thursday's fairly modest range, while leaving untouched nearly 3bln of 107.50 expires and the stops below the daily Tenkan at 107.39. There was some paring of losses in USD-JPY yield spreads from o/n lows, but Nikkei futures remain near their lows as the NorAm session starts to wind down. EUR/JPY, on the other hand, is making new intraday and Oct lows as we write, with the Sep low at 135.82 now nearby. Despite Eurogroup chairman Dijsselbloem mooting a more coordinated approach to reviving economic growth potential, few see a workable plan coming together quickly enough to right that listing ship, nor is the ECB's ABS/CB plan seen as a game-changer. EUR/JPY is flirting with its weekly Cloud base at 135.31 with the Tenkan & Kijun bearishly aligned above. AUD/JPY is now well below its 200-DMA looking even gloomier after China slapped trade tariffs on coal imports. GBP/JPY eyes last month's lows.
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