JPY Trading Outlook (26-05-2014)

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.