JPY Trading Outlook (21-01-2015)

USD/JPY Last Friday’s failed attempt to retest the Dec lows and the strong close that session set the stage for today’s rally up through the daily Cloud top, the Tenkan, the Kijun and the down TL off the Jan highs. That broken TL was used as support in Noram trading as prices corrected into midday. New recovery high since then has put offers between 118.85-119 in play ahead of the 21-DMA at 119.09. The intraday rebound got legs after the US equity and Tsy yield slides were erased, or nearly so, as the day wore on. N225 futures had outperformed S&Ps o/n on speculation of some kind of BOJ easing tweak at tonight’s policy announcement. Another major QE looks extremely unlikely this close to the Oct surprise and because the front of the JGB curve has already gone negative and the back end is causing headaches for pensions and insurer who can’t match assets with liabilities. In any event, the late Dec-early Jan highs in the upper 120.00s are back in play. Sell-the-news unwinding of oversold EUR/JPY trades into the ECB meeting lifted it again, but a close above the Jan 15 high at 138.78 is needed to make this more than short-covered rally.