EURJPY heading higher into next week...

EUR

The Euro looks set to end a whippy week nearer the upper end of its parameters vs the Greenback (1.2058-1.2183), and has taken some heed of better than expected Eurozone (German mainly) hard data after a rather downbeat Ifo survey. However, this does not begin to tell the full story as the single currency sold off sharply when ECB’s Knot declared that the GC could cut rates further to counter Euro strength if required, and his dovish interjection was compounded by an official source reportedly saying that markets are underestimating the odds of an ease. Subsequently, at least 2 other policy-makers and different sources have downplayed the probability of lower rates, with only marginal deliberations on that stimulus as benefits are deemed limited, while Euro appreciation is not a big concern given comparatively small moves over the last 6 months.

JPY

105.00 vs the Dollar seems to have been a stretch too far for Yen bears, but having failed to build enough momentum to scale 103.50 and then falling below 104.00 it’s been almost a vertical line for Usd/Jpy. Notably, the breach of 104.40 when that was the 100 DMA only paused briefly ahead of 104.50, and the ensuing advance was even more rapid in wake of softer than anticipated Japanese IP and a BoJ Summary of Opinions urging the Bank to strengthen its easing stance due to heightened deflationary threats. Note also, the Yen was excluded from the list of G10s to buy vs the Buck for the turn of the month and this was also evident in the Eur/Jpy and other crosses.