JPY Trading Outlook
US Dollar was firm against most of its major counterparts on Tuesday. On the US economic data front, durables good orders rose 0.8% MoM (-0.7% expected) in April after an upwardly revised 3.6% gain the previous month. FHFA House Price index increased 0.7% MoM (+0.5% expected) in March while the Conference Board consumer confidence index jumped to 83.0 as expected in May from 81.7 the previous month. Finally, Richmond Fed manufacturing index was unchanged at 7 (8 expected) in May while Dallas Fed manufacturing activity dropped to 8.0 (9.5 expected) from 11.7 the prior month.
USD/JPY Recovery from Wed’s 100.81 low peaked 102.03 Friday and posted 102.05 highs in Asia today. Setbacks have been limited however and lead many to position for another push higher targeting mid 102’s. However, resistance is strong with decent exporter offers through 102.20, daily highs 102.13/28 from May 15/14, 100dma 102.50 and the daily cloud between 102.35-67. Decent bids in to 101.50 and the 200dma at 101.33. EUR/JPY recovery from 138.15 lows Wed’ peaked 139.13 Thurs and yet to extend (139.10 today’s high).
USD/JPY The rebound begun midweek, after this year's 101.76 lows couldn't be broken below, endured on Friday, marginally piercing the export and range-fading spec offers at 102 by the NY afternoon. An early bond mkt close here has sapped the already sleepy Friday afternoon session's liquidity and interest. A WSJ Kuroda interview left the impression the BOJ Gov is either delusional regarding the yen not being able to rebound further after last year's plunge or is hoping that PKO and arm-twisting will keep USD/JPY & EUR/JPY supported. If need be, QQE2 could be launched, though this is not favored. More telling might be Kuroda's thinly veiled warning to the Abe govt that without broad and timely structural reforms (3rd arrows) growth could languish and stagflation could ensue. Techs point to the 102.40-65 area as major resistance and a decent fade unless the MOF flow data show Japanese buying of foreign bonds is accelerating in a structural, rather than seasonal, manner. A tightening of EZ peripheral spreads wasn't enough to lift EUR/JPY past Thur's rebound high, due to IFO and Ukraine elections. AUD/JPY made the most of the risk rebound du jour: 94.56 eyed.
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