Talking Points:
• All Yen crosses are exposed the ebb and flow of 'risk appetite', a theme that is skewing in its potential
• For EURJPY, the combination of two very dovish policy bodies makes for a unique combination
• If the BoJ decides to disappoint market expectations of a QE upgrade, it will further leverage the ECB's bearing
See how retail traders are positioning in the majors in your charts using the FXCM SSI snapshot.
I discussed the unique fundamental and technical conditions behind USDCHF a few days ago as they offer considerable potential. Another pair that presents a remarkable mix is EURJPY. This pair maintains a distinct connection to 'risk trends' as with all Yen crosses. Given the outlook for growth, financial stability and return potential; the weight is steadily increasing for all of these pairings, EURJPY. However, a new fundamental pressure is rising, and this one is less dependent on big changes in speculative bearing. The scales of monetary policy escalation are shifting. Where the BoJ was the most aggressive dove in the global central bank spectrum, the ECB is working to take over. While the BoJ has upgraded its QE and may do so further, the return on these moves is shrinking. Meanwhile, we have only recently waded into European accommodation. If this skew further finds traction with the ECB discussing more in December while the BoJ skips a heavily debated upgrade on Friday, it can prove another hefty catalyst to break the EURJPY range. We focus on this unique pair in today's Strategy Video.
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