Snapshot: EUR/JPY trades with a heavy bias as the ECB’s mild easing stance contrasts with the Bank of Japan’s slow policy normalisation, highlighted by Deputy Governor Himino’s address to parliament today. With Eurozone core inflation tracking at 2.3% and ECB speakers Elderson and Cipollone on the wires, domestic monetary divergence remains the core driver. This cap on the cross is reinforced by a risk-off shift as the VIX jumps 12.37% to 18.44.
- Pay close attention to Japan’s intervention zones; any sudden yen weakness past prior MoF action levels materially raises the threat of direct communication or physical action, limiting EUR/JPY upside.
- Monitor risk sentiment at the NY open, where the 15.0bp backup in the US 2Y yield to 4.2% and weaker crude prices threaten to accelerate cross-asset deleveraging.
Bias into NY: We lean short EUR/JPY into the New York session, targeting a test of the 168.50 pivot as rising global volatility and softer WTI crude at 84.65 weigh on risk-sensitive cross currency pairs.