JPY Trading Outlook (21-10-2014)

USD/JPY Most of the USD/JPY’s intraday fall from o/n highs came before 8:00 AM ET, with the dollar struggling against most currencies to start the week. The nearly 4% rebound in the N225 o/n left the yen weaker on almost all the major crosses and the N225 futures London pullback was followed by a mild rise on NorAm trading, but falling USD-JPY yield spreads kept USD/JPY heavy, even after the large 10ET expiries between 106.75/90. The 107.39 highs stopped just shy of the Oct 15 breakdown session high, as well as the daily Kijun & 50% of the Oct slide at 107.64. With prices today homing back down to the Tenkan at 106.97 and falling further below the Kijun, the risk is for a test of the daily Cloud top, Tuesday at 105.39. Of course much of the yen’s re-risking dip & the Nikkei’s rise o/n was bolstered by reports GPIF will eventually raise its stock allocation above what most were expecting and that the Abe govt is getting cold feet on raising the VAT again next year. Neither event would be shocking, but neither has been confirmed, and both have potential drawbacks. O/S bounces in the yen crosses look like mean reversions. China data key tonight.