From the FXWW Chatroom: Tightening global liquidity conditions and continued tensions in global trade suggest we should stick to our strategy of buying JPY across the board as the currency could strengthen on potential repatriation flows. We see good risk/reward in funding this JPY long trade using EUR, as the EU migration summit over the weekend did not improve the outlook on the German political situation, with the EU states having opposing positions and not being able to even reach a common statement. Moreover, the US administration threatening to impose 20% tariffs on EU autos imports may weigh on EMU soft indicators further. Markets may also increase the risk premium priced into EUR going into this week’s EU Council Meeting and Sunday’s CSU meeting to decide whether any potential migration deal reached at the EU Summit is acceptable. The risk to this trade is a more positive outlook on the German political situation, providing support for the EUR.
We like to sell EUR/JPY at market with a target of 122.00 and stop of 128.90.
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