JPY Trading Outlook (01-10-2014)

USD/JPY Soft Japanese data o/n and decent gains in Tsy yields accompanied the late-Asia to early NorAm rise in USD/JPY to 109.86. Mostly below-f/c US data and still fairly staunch resistance into the 110 barriers, spec P/T & exporter offers, as well as PRDC structures were enough at period end to foster a pullback to the hourly Kijun at 109.50. USD/JPY then settled into a quiet range between the day’s high and the importer and fund bidders at 109.50. More bids are noted just above and into 109, by the 10-DMA & Tenkan lines. Those line should be at or a bit above 109.50 Wed. Interestingly, USD-JGB 2-yr spreads haven’t made new highs since the 24th and 10-yr spreads peaked on the 18th. That USD/JPY’s been able to make new highs since then shows at least some of the USD’s appeal is as a safe haven; a category the yen used to dominate when Japan was deflating, it ran Trade surpluses instead of deficits, and before the BOJ launched QQE. Next week the BOJ will have another shot at revising down its reflation expectations closer to the market and the econ results since April’s consumption tax hike, but QQE2 will likely have to wait.