JPY Trading Outlook (28-10-2014)

USD/JPY General USD softness, a bit of renewed equities selling, and slightly lower Tsy yields amid below f/c econ data du jour dragged USD/JPY below hourly Cloud support by the 107.73 o/n low after the 108 option expiry at 10ET. Light stop-loss selling was triggered and prices eventually breached the daily kijun & prior 50% Fibo at 107.64 for a 107.60 session low. There is general concern that the yen’s retreat last week was just a correction within a broader derisking trend; one that is starting to manifest itself in renewed stocks mkt weakness. This angst is partly being fed by the event risk from the FOMC on Wed and the BOJ meeting Friday; the latter also providing updated econ forecasts that could hint at whether the BOJ will increase or modify its QQE in the coming months. Friday will also bring Japan CPI among several other key economic releases, so traders will be wary of overtrading before then unless the FOMC stir the pot on Wed. ECB stress tests didn’t put to rest the question of deflation risk and what the ECB might end up doing on the QE front to address it. EUR/JPY shed its o/n gains ahead of the NY open, but Fri’s low by 136.50 was untouched.