JPY Trading Outlook (12-02-2015)

USD/JPY Tues’s Cloud top and TL breakout extended Wed beyond some barriers and exporter offers at 120, eventually running into resistance by the down TL from the Dec 23 and Jan 2 high at 120.48 and offers at 120.50. Fed speakers again reinforced the notion that rate hikes are coming this year, but USD/JPY’s rise was buoyed far more by techs & N225 futures than by USD-JPY yield spreads. Those futures have got as high as 18,010 today vs the Dec peak at 18,115. A breakout above the Abenomics high (cash at 18,030) would be bullish for USD/JPY, but raises the question of which mkt is leading. BOJ’s Sato said today that QQE is working, but said mkt concerns about fiscal policy and inflation could undermine their efforts to keep JGB yields depressed. In any event, the Dec 23 high at 120.82 is next beyond the c120.50 offers. If US Retail Sales are decent Thur, it should push this pair much higher. Lacking any clear EZ-Greece conclusion, the working assumption remains that some deal will be reached, which is allowing the O/S rebound in EUR/JPY to remain on track to retrace 38.2% of the Dec-Jan slide at 137.65. Machine Orders from Japan tonight.