JPY Trading Outlook
USD/JPY A mixed day for the yen, but USD/JPY had some downside drama, breaking below the 200-DMA, again, the June lows at 101.60 and the 61.8% of the May-June rally at 101.57. A fresh drop in Tsy yields and early weakness in equities, plus a newswire-story-driven dip in EUR/JPY took out those supports after mediocre US Consumer Spending results. But as the NY session nears its conclusion, it's too close to call which side of the 200-DMA (101.69) prices will end on. The pair already looks weak technically, being forced lower by the daily Cloud as the Tenkan crossed below the Kijun today. A surfeit of stories about Japanese asset reallocation into stocks, mostly domestic, and into foreign bonds ahead of the formal GPIF reallocation later this year, has not been enough to get USD/JPY back above its May or April highs. Toss in US rates not unable sustain uptrends out the curve and 2-yr ylds now looking top-heavy again by 50bp and USD/JPY will need all the local help it can get. EUR/JPY tumbled after another 139/200-DMA rejection and then on an MNSI ECB story. A rebound in stocks from morning lows helped crosses recover. CPI, Spending & Sales from Japan tonight.
USD/JPY A sharp, short break lower for USD/JPY below recent lows and the daily Kijun at 101.80-81 was precipitated by a huge downward revision to US Q1 GDP. Ancient history and skewed by healthcare stat adjustments (ACA), the data did not have lasting impact on either Tsy yields or the USD. Curve flattening actually lifted S-T rates as L-T rates dipped. Stock futures, US & Japanese, dipped on the headlines, but then rebounded, allowing USD/JPY to hold above its June 12 swing low of 101.60 after piercing the 200-DMA at 101.69. Prices are back above the 101.75 Cloud base as we head toward the NY close, though the 101.97 high is now below the daily Tenkan. Vols remain at L-T lows and a Reuters poll shows most expect the BOJ to launch QQE2 before year-end. EUR/JPY remains stuck in tight ranges below its 200-DMA & offers at 139. Carney's less hawkish appearance Tuesday left GBP/JPY to work off a bit more of its overbought condition, but NZD/JPY shook off a two-day pullback after using the daily Cloud top for support today. RBNZ rate hike and RBA rate cut expectations clearly favoring long NZD carry trades. MOF flows tonight.
USD/JPY The USD firmed a bit today on decent new Home Sales and Confidence data, but it wasn't enough to push USD/JPY out of the recent range between the Kijun at 101.80 and the 100-DMA at 102.22. There was an initial rise on the US data as shorter-term rates climbed, while S&Ps & Nikkei futures also gained, but the curve was flatter right from the start and eventually even short-term rates fell back, as did risk in general. A broken ceasefire in the Ukraine and talk of half-year-end portfolio selling in equities being on tap this week was enough to push USD/JPY off its 102.17 post-data highs and back to the converged 100 & 200-HMAs prices have been homing to lately. The late retreat in risk also pulled yen crosses lower. EUR/JPY's 138.93 high stopped just shy of the 200-DMA at 139.00. Weak German IFO was shrugged off. Repeated sales into the 200-DMA mean that a break above it would likely squeeze out some of the recently accumulated spec shorts, as seen in the COT data. AUD/JPY, NZD/JPY & GBP/JPY are all showing overbought tendencies, the latter reinforced by the less hawkish Carney et al today. Abe's 3rd arrow? Old news. Big JPY data day Fri.
USD/JPY Above-f/c Markit Japan PMI and HSBC China PMI failed to do the Nikkei any favors o/n, leaving USD/JPY struggling until bids by the daily Kijun line and Friday's low at 101.80-815 were reinforced by a spate of better-than-expected US data and firmer Tsy yields. A Reuters story on Abe's third arrow announcement due out Tuesday being light on key labor reforms suggests if there is upside for the Nikkei and downside for the yen, it probably will not be from Tuesday's announcement. Offers remain by the 100-DMA at 102.20. AUD/JPY surged on the China PMI, but gave back most of its gains over the course of the session after this year's highs couldn't be removed. GBP/JPY had its first session since June 12 without either a higher high or higher low and looks top-heavy technically and perhaps at some risk if the UK's FPC on Thur put forth a solid plan to keep the housing bubble under control, thus removing one reason for the MPC to hike rates sooner rather than later. EUR/JPY remains stuck below the 50% Fibo & 200-DMA at 138.90/96.
USD/JPY There was some catching up with recent Nikkei gains at week's end, putting pressure on the yen. Rumors, then confirmation, Abe would make a speech about the new third arrow plan next Tuesday, after the Diet session's end, raised some hopes the govt would not disappoint yet again. USD/JPY found buyers early by the daily Kijun at 101.80 and then rode a higher Nikkei, Tsy yields and oil prices into the daily Cloud and to the 100-DMA by 102.20. The Cloud top dips to 102.62 on Monday. US's data calendar is light next week. Japan kicks the week off with the June Mfg PMI. CPI, Jobs & Household Spending are on tap later in the week. EUR/JPY initially fell away from its test of 200-DMA, Kijun & 50% Fibo resistance by 138.90, but a handsome EZ C/A surplus may have eventually won over hearts and minds for a firm finish. Despite doings in Ukraine and the ME, the default mkt position is one of risk-taking, which favors yen sellers. EUR/JPY's weekly Cloud top held at 137.63 this week and it will begin to climb again in July. Some buy stops are above 139, with an eye toward the 140.09 June highs.
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