JPY Trading Outlook (29-07-2014)

USD/JPY The Nikkei took out the July highs to begin filling a 15,690-15,485 gap from late Jan, which was enough of a boost, along with a rise in Tsy yields, to keep USD/JPY nearly pinned to its daily Cloud (101.90-92) for most of Monday. A soft US Market Services Employment reading and downside miss in Pending Home Sales helped engineer the 101.76 late-London low, but prices are closer to the 101.91 highs heading toward the NY close. Beyond the Cloud are offers into 102 option barriers and heavy expiries on Thurs. 1-mo riskies have seen the bearish skew nearly erased, while 1-mo ATM vols have slipped intraday and remain near historical lows along with historical vols. So if a breakout is brewing, the market isn’t prepping for it. The converged 100 & 200-DMAs at 102.05/15 last have some buy stops beyond them. The thinness of the daily Cloud suggests it will be breached, but the down TL from Jan, at 102.37 Tues, may well suffice as a topside target. EUR/JPY remains wedged between this year’s 136.25 low and recent highs by 137.35. Tight ranges for the other major crosses ahead of key US event risks. Japan Jobs and Retail Sales data out tonight.