© Sebastian Gali
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Sebastian Gali
Senior FX Strategist at Societe Generale
USD/JPY
In terms of USD/JPY we have right now a bit of correction lower and going lower basically in the afternoon in Europe. The main sore behind the USD/JPY is that a lot of people have been netting that the Yen would weaken ahead of the new fiscal year in Japan by pressuring the Yen lower and relative to, for example, South Korean Won, Dollar and others. We have seen an attempt of this essentially because some of the data have been a bit more mixed globally. We retrenching from this position and USD/JPY is fitting lower back into its trading range, so the break-out of the long-term downtrend in the pair USD/JPY has not led to a serious move higher and were essentially fitting lower and traded roughly at 76-78 trading range at this point in time. As you see, nothing particularly exciting.
However, the Japanese Yen being sold across the border against the higher bid currencies, particularly, we would like to crane one of our one-year horizon. This is probably not going to be the most exciting trade in the Universe, but it should basically perform quite decently over a one-year horizon.
EUR/USD
For the most traded currency we expect that Quantitative Easing in the form of the Long-Term Refinancing Operation, particularly, the one coming in February, should help EUR/USD to fade lower. We have started that move, partly it is linked to a risk of environment since, for example, we do not have any resolutions regarding the negotiation on the banks' participation in the debt restructuring among other pressures predominantly appearing out of Portugal. The yields in Portugal are heading all high, especially in the back-end of the curve. One should simply look at 10-year yields where the clear pressures are similar to what we saw in the past in Greece, but to a lesser extent, so there is a bit of a fear there.
The EUR/USD pair is anticipated to head to 1.17 somewhere in the mid-year and we expect it to recover to 1.29-1.30 by the end of 2012. We are looking to see the move higher in the pair and we hope it face a subtly lower. The positions in EUR/USD pair remain extremely bearish. In the short-term we probably are going get a slight acceleration in the EUR/USD to challenge the upward trending channel from January which should move towards 1.30 in the short-term.