JPY Trading Outlook (06-03-2015)

USD/JPY spiked up to its 120.40 session high after the 8:30ET US data releases and the start of Draghi’s press conference. It was a counterintuitive move in that US Claims were well above f/c and USD-JPY 2-yr yield spreads began to fall. Exporter and macro offers at 119.40-50 were reinforced by the upper 21-d Bolli and the Feb highs nearby.Longs got shaken out to 119.94, just above Asia’s high and close to the USD3bln of 120 expiries at the 10ET cut. After that cut prices improved a bit from 120.00 to 120.27, in line with a bounce in Tsy yields and broad-based USD buying. A higher-than-expected 4.1% rise in Q4 US Unit Labor Costs may have given Fed hawks and USD bulls a little something to lean on amid today’s mediocre data, which included another drop in Factory Orders. More broadly, MOF flows show GPIF et al remain highly acquisitive of foreign stocks and bonds. A breakout and close above 120.50 is the main topside objective. The way the USD’s been trading of late, anything close to f/c in Fri’s NFP should be enough to push it higher as the ECB goes QE & after 43 rate cuts have been made by other CBs this yr. EUR/JPY teeters on Feb’s 132 low.