JPY Trading Outlook (09-03-2015)

USD/JPY A bigger-than-f/c rise in NFPs and drop in the Jobless Rate, including the U6, were enough to send Tsy yields surging and USD/JPY up through 2014 highs by 120.50/75, and eventually above 121 after the hefty 10ET expirations there. Today’s 121.29 high is the highest since the Dec 8 peak at 121.86; That high was the highest since July 2007, which was the month after prices peaked before the GFC began. Gains were pared back in the NY afternoon to 120.58 as surging interest rates took their toll on equities, including N225 futures. Exporters were happy to sell USD/JPY above 121, but we suspect the GPIF et al will also be happy to buy any dips amid the much higher Tsy yields on offer. Of course the L-T concern is that GPIF’s rerisking strategy could backfire amid a prolonged equity and bond prices slide or yen recovery, which is why the BOJ will persist with QQE2. Beyond the 121.86 peak, the focus shifts to the 2007 peak and technical targets in the lower 124.00s. EUR/JPY’s descent came first on EUR weakness in London, then on a rebound in the yen in late NY on risk-aversion buys amid stock declines. Jan 26 low at 130.16 is within reach. JPY GDP r Sun f/c lower.