JPY Trading Outlook (16-05-2014)

USD/JPY A risk-off NorAm session, at first driven by weak EZ GDPs, but then by a plunge in US IP, forced yen-funded trades to be exited as Tsy yields tumbled again and stocks followed suit instead of taking the drop in yields as an excuse to reload risk, as has happened in the past. Sell stops below 101.50 and smaller ones below May 7 swing low at 101.43 were run, but prices found the noted “good” local bids into the 101.32 April lows (101.31 today’s low). Stellar Japanese Q1 GDP may make the BOJ more optimistic about the economy’s ability to handle the April tax hike and less willing to consider QQE2, but exporters and foreign investors are more than happy to fade rallies. The daily Kijun has slipped to 102.22 and some offers are now by 101.70 (Wed’s low and the underside of the up TL fm Jun ’13). One-mo implied vols have been trying to base out with realized, while RR are showing fresh bearish skew today, but all are at extremely subdued levels. EUR/JPY broke Fibo support at 139.13. The 200-DMA at 137.90 is key, having not been breached since Nov ’12. IMM net spec long EUR/USD & USD/JPY positions remain plump at US13.3bln. JPY IP tonight.