JPY Trading Outlook (08-07-2014)

USD/JPY Almost all of last Thur’s USD/JPY rally and daily range on strong NFPs was retraced on Monday. Things got off to a shaky start in Asia when the BOJ’s Nagoya (where Toyota is centered) branch head said some firms in the Tokia region thought further yen weakness was undesirable as it would lift already rising energy costs. The BOJ has reaffirmed it sees no need to up the QQE ante at this point and fewer are predicting QQE2 this year, despite the 2% CPI goal also looking a bit out of reach this year and perhaps next. USD/JPY ran into exporter and range-trading offers in the 102.20s ahead of last Thur’s 102.27 peak, falling to 101.78, where the daily Cloud base & 200-DMA collide. A massive typhoon is headed for Japan’s southern-most islands on Tuesday [ID:nL4N0PI1A8]. This probably didn’t help the already receding Nikkei. The bigger issue for USD/JPY bulls is that without the promise of QQE2, even rising Tsy yields and Nikkei prices may not be enough to push the pair out of it multi-month comfort zone and low vol state. EUR/JPY, too, is struggling to maintain gains against the mildly rising 200-DMA as it approaches the daily Cloud base in the mid 139.00s. Weak German IP & doubts about structural reforms in places like Italy suggest the ECB will be leaned on for more easing. Most crosses softened on the mild risk-off tone today.