JPY Trading Outlook (04-02-2015)

USD/JPY Beyond the frantic post-RBA cut AUD/JPY dive and recovery, EUR/JPY was the standout. Another chunk of the historically large crop of EUR spec shorts were either squeezed out or opted out of their positions. The move gained pace after the 200-HMA was cleared for the first time since late Dec. Stops then run above two Fibos by 134.80 and 135. Next hurdle is the 21-DMA, but the likelihood is a 38.2% retracement of the Dec-Jan slide to 137.66. The Jan 20 high is also there. USD/JPY made another long-legged daily Candlestick as shorts had to chase rising pullback lows along with Japanese importer bids (some watching oil rebounding crazily). Broader unwinding of long dollar trades and limited USD-JPY yield spread gains allowed the daily Tenkan to cap by the Asia and NY highs at 117.75. Many traders are lightening up ahead of the US jobs report on Friday, thus the mean reversion trading pattern this week. AUD/JPY recovered with commodities, but 2-yr yield spreads are close to 1992 lows. Prices homed back toward the Oct ’14 swing low at 91.72 from 89.32, but offers into 92.00 persist. Abe’s BOJ board replacement, Harada, a dove, as expected.