JPY Trading Outlook (24-09-2014)

USD/JPY There was a broad USD hiccup o/n on word of extensive US-led bombing of IS in Syria, but the drop in USD/JPY was scooped up by funds after stops below the preceding two days’ lows were run. The 108.25 session low pierced the Sep 18 low and daily on-close pivot pt at 108.32, but a close below was never much of a danger, as prices surged to 109 in NorAm trading. The risk-off flows out of equities, EM, commodity ccys and the like, plus and a drop in USD-JPY 2-yr spreads ahead of today’s 2-yr Tsy auction (solid indirect bidders) kept the 109 hurdle intact in the afternoon, though it’s right below there at this writing. Fed’s Bullard struck his usual hawkish tone, while Kocherlakota his dovish one. A SF Fed research piece from earlier this month & Hilsenrath’s latest tended to cancel each other out. The bottom line is that most believe the Fed will be able to raise rates next year, even if perhaps less than the dots would suggest, while almost nobody thinks the BOJ will back off their massive QQE next year unless the yen goes into a tailspin. Thus, 109.50 and 110 barriers remain fruit to be picked. EUR/JPY held its weekly Cloud top at 139.21 & daily pivot at 139.15.