JPY Trading Outlook (03-10-2014)

USD/JPY A retreat in the overbought USD teamed up with a rebound in the oversold JPY to send the pair below last week’s 108.25 low & to a session low of 108.01 before recovering with equities from their lows in the NY afternoon. Heavy fund selling, particularly early and in EUR/JPY, drew USD/JPY lower, but the yen was widely bid after an apparent double-top in the N225 and a 1.9% drop in N225 futures at least glance (well off the day’s worst and roughly -5% on yr). Horrible BOJ Consumer Confidence results for Sep, the drop in the Services Tankan and a recent Rtrs polls showing 75% of Japanese businesses don’t want a weaker yen create a dilemma for the BOJ and Abe, particularly with consumers not seeing the CB reaching its 2% CPI target over the next 3 yrs. Upping QQE now might do more harm than good to the domestic economy, while favoring exporters only to the extent that it inflates overseas earnings. At any rate, USD/JPY’s 109.12 high today was at the just-broken and rolling over Tenkan line. If not retaken and closed above, a break below the 21-DMA by 108 will be next, with pullback targets eyed by 106.80. Big GBP/JPY breakdown brewing.