JPY Trading Outlook (07-05-2014)

USD/JPY: London’s return from its bank holiday brought a swathe of USD/JPY sales, amid broad USD selling. Macro selling into early NorAm trading got it down to the up TL off last June’s lows at 101.49. Equities, outside of EM, struggled as the day wore on, as did long-term Tsy yields. USD-JPY 30-yr yld spreads have fallen by nearly 60bp since the turn of the year, while 2-yr spreads are virtually unchanged. US Q1 GDP revision F/Cs were again lowered by several banks today. USD/JPY’s y/y % change has slid to just +1.1% from +28% a year ago, and could be directly threaten Abenomics trades if allowed by the BOJ to go negative. Bidders, some mooted to be of the semi-official variety, are touted in the low 101.00s to retain the pattern of higher swing lows since the Feb lows. The 200-DMA, last at 101.04, also looks pivotal, with no trading days fully below it since Nov 2012. Offers at 101.85/102. Thursday shows 3bln 101.80-102.00 expiries, over 1bln at 102.50 and 1.3bln between 102.90-103.00. EUR/JPY breached the up TL from Feb lows. BOJ Minutes, Markit Services PMI and Yellen’s JEC are on tap Wed.