JPY Trading Outlook (02-10-2014)

USD/JPY After rising through option barriers/PRDCs and stops at/above 110, USD/JPY ran into offers defending 110.10. That set the bearish tone for the day. Plunging equity prices and Tsy yields (and USD-JPY yield spreads) ushered prices below bids at 109.50 and into stops below. At this writing, the 10-DMA at 109.13 is still holding its initial test, but prices are near their as the NY session draws toward its conclusion. While ADP was solid, ISM missed enough to suggest to some that the story of stoic US growth vs slowdowns almost everywhere else might be overstating the USD’s yield-driven case. Fed dot plots are looking even less realistic. With USD/JPY hugely O/B across medium & L-T timeframes, the threat of an overdue correction persists. Prices haven’t closed below the daily Tenkan (109.17) since clearing it on Aug 13 at 102.80. With asset classes far & wide straining under de-risking/repatriation flows and most Japanese businesses and consumers no longer happy with a falling yen, if the NFP report disappoints Friday and USD/JPY does not finally correct, we’ll know just how strong the uptrend is. EUR/JPY is retracing the remainder of Sep’s rebound.