JPY Trading Outlook (13-08-2014)

USD/JPY The yen was generally softer Tuesday after further evidence the post-tax-hike economy has been weaker than expected, leaving the BOJ and the Abe govt in something of a bind regarding the upcoming decision on whether to raise the consumption tax again next year. Few see the BOJ’s 2% CPI goal as attainable within two years and the betting for another BOJ QQE has firmed again, though with JGB yields as low as they are and most of the govt’s new issuance already being bought by the BOJ, one has to wonder about the scope for QQE2. USD/JPY is mean reverting to the slowly rising 200-DMA, last at 102.32. Bids remain at 102 with offers at 102.40-50, though most look to fade ranges while daily closes are above 101.50 and below 103. The Nikkei’s daily Cloud base rebound Friday has been followed by a Cloud top rejection so far this week. Tsy yield curve steepening via the long-end did little for USD/JPY as the move was seen as corrective. 1-mo vols holding by 5 as traders look for signs of a trend other than sideways. EUR/JPY still managing closes above Feb 136.25 low, with some hopes on the Ukraine front offsetting a lousy German ZEW. Japan GDP out Wed.