JPY Trading Outlook (08-08-2014)

USD/JPY Yen strengthened across the board as stocks and rates fell sharply. The ECB declined to engage any further easing despite acknowledging downside geopolitical and economic risks. This is not what global equity markets wanted to hear as a key tenet of the Street’s consensus bullish posture rests on European QE. USDJPY faded against yesterday’s pivot point at 102.45 but the larger story lies in EURJPY, sitting at the year’s lows and what that might mean as a global risk benchmark. (10 yr US treasuries at new closing low yields being another) The debate continues over the origin of yesterday’s spike in yen futures. Given the gathering momentum downward in stocks I reckon that, although clumsily handled, it was a legitimate long liquidation and something we’re likely to see more of as short yen strategies look increasingly vulnerable.