JPY Trading Outlook (10-10-2014)

USD/JPY USD-JPY 2-yr yield spreads fell today to their lowest since Aug 21, while the N225 futures tumbled to Aug 18 lows. USD/JPY closed those two days at 103.84 and 102.56, respectively. That today’s range was 107.53-108.32 indicates just how much the continuing divergence between rapid BOJ balance sheet growth and Fed’s tapering end is keeping prices aloft. Today’s high was 2 tics below the up TL from Aug that was broken below on Tuesday and prices are threatening to close below 108 finally. The Tenkan at 107.39 and the 3-yards of 107.50 expiries for Friday have yet to come into play. With enough pressure from a falling Nikkei, those supports will be removed. A double-top in the N225 and an Island top in the TOPIX add to the bearish view there. N225 futures are down by the daily Cloud base & up TL off the May-Aug lows, with the 200-DMA not far below at 15,140. AUD/JPY has pierced its 200-DMA for the first time since overtaking it in March. All the yen crosses are heavy amid derisking/yen short-covering. BOJ’s Kuroda kept the door open to QQE2, but remains unmoved to adjust at this stage.