JPY Trading Outlook (08-05-2014)

USD/JPY For the sixth time in four months, USD/JPY prices have fallen into the lower 101.00s and found demand there from Japanese importers and a shrinking number of spec traders looking for values as well. But unlike the preceding four pullbacks, this one comes after a lower recovery high. The Nikkei’s 13.8% y-t-d loss and the drop in USD/JPY y/y % change from +28% last May to about 1% today are clearly making specs nervous and should make the BOJ nervous, too. Current range is 101.20-102.00, with a bit more supply by 102.20. Thursday sees expiries 101.30 (490M), 101.50 (355M), 101.60 (584M), 101.80 (280M), 101.90 (575M), 102.00 (2.5BLN), 102.50 (1.2BLN). Note that implied vols in USD/JPY have picked up marginally on the weaker spot tone, but market is not short gamma until nearer 100.00 to limit vol demand. EUR/JPY dipped further into its Cloud and breached the up TL from Apr ’13 lows, but is ending up near unchanged into the ECB tomorrow and after Putin’s comments were eventually discounted as more propaganda.