JPY Trading Outlook (11-08-2014)

USD/JPY completed a roundtrip from 102.00 down to 101.50, and then back again as the pair correlated almost perfectly with broader movements in the stock and bond markets. Overnight fear abated as US airstrikes in Iraq were limited and Russia ended it’s military exercises on the Ukraine border, sending bears running for cover. Bunds and US 10 yr notes still closed at new low yields on the year and should be taken as a sign that, regardless of the state of play in various geopolitical hotspots, all is not right with the global macro condition. Short yen trades (especially EURJPY) may have been saved for today but look increasingly vulnerable as carry strategies will stay under pressure as the Fed recedes and BOJ and ECB easing schemes are proving to be ineffectual.