JPY Trading Outlook (18-11-2014)

USD/JPY Considering the scale of the Japanese GDP miss, USD/JPY actually held up fairly well vs most of the other major USD pairs. Abe’s delaying of the Oct ’15 VAT hike and calling of a snap election on Dec 14 is fait accompli. There is also likely to be far less QQE2 dissent, if any, at Wed’s BOJ policy meeting. And the fact that yen weakness wasn’t an agenda item at the G20 suggests the ball remains in the BOJ court. The rebound from Asia’s 115.45 low in USD/JPY got to 116.54 in late London trade, despite soft HL US IP & CU results. Mild weather and weak energy prices trimmed the broader results. The rebound in N225 futures wasn’t as big as USD/JPY’s, while falling USD-JPY 2-yr yield spreads put a lid on gains in the afternoon. Though Japan’s Q3 GDP miss may be revised upward, the focus is now shifting to when QQE3 might be launched and whether the ’15 extra budget will be pruned due to the VAT hike delay. The Oct ’07 high at 117.95 still looks within reach fairly soon. Marginal net losses on the day for most of the yen crosses.