The EUR's direction this week should have been influenced more by euro fundamentals -- but it was not. The 17-member single currency has ended up being pushed and pulled by a screaming yen that happens to be supported by the BoJ's aggressive monetary easing program. In hindsight, this week's asset and forex moves have more to do with the markets anticipation of what the Japanese investor will be doing, and not what they are actually doing.
The EUR reached its "prudent" breaking point on Friday. This month's EUR/JPY 12-big figure move beckoned long positions to take some profit off the table -- with JGB yields rising instead of falling post-BoJ, undermining this one directional trade. A healthy trade requires some breathing space. By booking profits for whatever reason -- JGB's getting slammed, headlines on Cyprus asking for more money, or Italy needing to raise EUR60 billion-plus in more funding -- that instigates an "orderly retreat" only proves the "worth" in that overall trade.
It is a tad surprising that weaker U.S. retail sales data and consumer sentiment did not produce more dollar buying against the EUR. The market seems comfortable buying EUR's on dips, despite the daily technicals looking overbought. With not decent sign of a turnaround just yet, buying dips' "safety in numbers" remains the number one course of action.
Next week it should be a quiet start to the week with no data from the U.K. or elsewhere in the eurozone. There are no auctions to even speak of, which should leave investors to ponder over what was said and not said at the euro-finance ministers meeting in Dublin, as well as possible event risk from North Korea.