JPY Trading Outlook (01-08-2014)

USD/JPY Risk came off big chunks in the NorAm session, particularly after the Chicago PMI drop shocked Tsy yields back down to about unchanged. But the derisking move was already well afoot in Europe, following on from Wed’s theme in the face of much higher Tsy yields and despite the FOMC’s still cautious tightening scenario. Equities and credit bore the brunt of today’s derisking, while USD/JPY made another short-lived push past 103 on the first round of US data, only to trundle back to o/n lows with Tsy yields. Interestingly, the yen is not finding a risk-off haven bid to speak of, in part because the recent Japanese data have revived fears that this year’s consumption tax is having a much more negative impact on the economy than the BOJ or the govt thought it would and because the July rise in short-term Tsy yields is underpinning prices. In the wake of Friday’s NFP and July ISM, USD/JPY needs to close above 103 to confirm that daily overbought pressures are not the bigger threat than a retest of the 105.45 Abenomics/QQE peak. 137.83 is EUR/JPY’s on-close pivot pt. Tonight we have Kuroda speaking and the July Markit PMI.