G10: Long NZDJPY
Rationale: Abe’s election performance has raised the probability of monetary and fiscal easing in coming weeks. We expect JPY to tactically underperform in G10 FX under such a backdrop. Meanwhile commodity currencies should continue to be supported under the tactically risk-on environment. We pick going long NZD compared to CAD or AUD due to a less noisy local calendar in New Zealand this week. AUD could be vulnerable to employment data and the unclear local political situation, while CAD could stay dragged down by a lower oil price on the back of a higher US oil rig count. Another factor that may support this trade could be favorable positioning points from the JPY and NZD side (although we would treat CFTC data with caution for a large currency like the yen). One risk to this trade could be from potentially soft Chinese trade data later in the week.