JPY Trading Outlook (25-02-2015)

USD/JPY High hopes that Fed Chair Yellen’s testimony would at least moderately reinforce the notion of tightening finally beginning midyear had sent USD/JPY to a fleeting intraday peak of 119.84, only to have prices implode when it became clear she was intent on not boxing her or the Fed into any tightening timeframe. Tsy yields tumbled, dragging USD-JPY 2-yr spreads to their lowest since Feb 6 and USD/JPY all the way down to Monday’s 118.75 low. Prices did, however, manage to hold above the 55- & 21-DMAs at 118.71/51, as well as the daily Kijun at 118.56. The net change on the day is negligible, due to the Fed Chair’s noncommittal stance. The implied yield on the June Fed funds futures contract is 15.5bp and only about 1.5bp less than Monday, though yields further out the curve were 4-6.5bp lower, in part still working off some of the outsized rise in rates that followed the Jan NFPs report. Exporters remain happy to fade rallied toward 120 and 1-mo vol has sunk back to the Feb 5 nadir of 9.2. Daily Cloud twists Wed, with the base rising to the key 118.10 support level. There’s a flurry of US & Japanese data on Thur & Friday, along with more Fed speak.