JPY Trading Outlook (25-08-2014)

USD/JPY With help from a USD-bullish interpretation of Fed Chair Yellen’s JH speech and higher Tsy yields, USD/JPY cleared its Apr peak at 104.13 and the offers by 104. But both USD & Tsy yield gains receded in the afternoon, dragging USD/JPY back down to around unchanged for the day. Bidders noted at 103.50. With daily RSI in the 80s, prices spending much of the last three days trading above the upper 21-day Bolli band and historically elevated short spec yen positioning, some pre-weekend pullback was always a risk, if countered by de rigueur dip-buying and a lack of serious exporter selling pressure. Just as ECB’s Draghi noted that the EUR should weaken further as a result of diverging ECB & Fed policies, the markets also assume that the Fed-BOJ contrast and no serious political pushback against QQE mean this year’s 105.45 peak remains in play. There was a modest setback in the N225 futures and other equity indices Friday, but not enough to seriously undermine the USD/JPY’s risk-related bid. EUR/JPY consolidated gains after hitting 138 & offers just ahead of the Aug 1 high, while AUD/JPY retained its post-breakout gains into the weekend.