View from London: Euro/Yen Among Currency Trading Puzzles

Focus: CURRENCIES

Robert Savage Image Robert Savage Partner & CEO, CCTrack Solutions

Eisenhower forced the deal with the Chinese and North Koreans by threatening nuclear war leading to the present DMZ and new 38th parallel South Korean border.

So, the news flows were mostly ignored other than the verbal sparring overnight. This leaves some room to be wary as U.S. markets await the next response from Trump. The U.S. data from JOLTs was strong enough to support the USD but the fear factors now mute that story.

The weaker China CPI and flat PPI suggest no inflation is breeding there and the better French and Italian Manufacturing just highlight the Goldilocks world except for the geopolitical noise.

So, we are caught in a risk-off mood being called either a bluff or an opportunity – with no clear indication of which as many seem frozen in the heat of summer waiting for more information. The chart that seems less clear is euro/Japanese yen (EUR/JPY), which captures the broad uptick in EUR over the last 3 months driving on better growth and ECB taper talk against the JPY which has been modestly trying to trade in 110-115 envelope with BOJ encouragement.

The break of 110 in USD/JPY leaves the 130 break looking more interesting in the cross and suggests 127.50 is the next big level to watch – that may be the best indicator of the path chose by investors in the days ahead.

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