The Yen’s Easy Moves Are Over

The easy moves are over, or so it seems. The well-lit path to EUR/JPY gains that this market has bore witness to since last September could be nearing completion. The many yen funded speculative trades that investors entered into may now be at risk. The increased chatter of PM Abe’s “easy” policy rhetoric may already be hitting its political limit. While the EUR’s –2% fall from grace this week on the back of a plethora of negative Euro data is beginning to convince investors that we are perhaps entering a new leg of a EUR correction rather than something more perverse.

Compounding the EUR’s problems is that the regions peripheral spread tightening has probably maxed out. Even though the LRTO2 payback announcement was way less than consensus expected on Friday morning, any paying down early of the program will prevent banks from the region to want to own similar regional product. This scenario will again expose the EUR to further weakness and have this market sit up and take stock of Yen funded trades.

 

WEEK AHEAD

* NZD Reserve Bank of New Zealand 2-Year Inflation Expectation
* USD Consumer Confidence
* USD Fed’s Bernanke Testifies at Senate Banking Committee
* GBP Gross Domestic Product
* USD Durable Goods Orders
* CHF Gross Domestic Product
* EUR German Unemployment Rate
* EUR Euro-Zone Consumer Price Index
* USD Gross Domestic Product Price Index
* CNY Manufacturing PMI
* USD U. of Michigan Confidence
* USD ISM Manufacturing

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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Dean Popplewell

Dean Popplewell

Vice-President of Currency Analysis and Research at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell