Week Ahead: Profit-Taking On EUR Longs After ECB; Short JPY Into BoJ

Credit Agricole CIB FX Strategy Research argues that there are reasons to expect that President Draghi may opt to follow in the cautious footsteps of the Fed Chair next week.

"Indeed, not doing so could trigger further aggressive tightening of Eurozone financial conditions (as indicated recently by the soaring Eurozone FCI index) via stronger EUR and higher rates, and EGB yields. The ECB President could highlight the risks to the inflation outlook posed by further sustained EUR appreciation," CACIB adds.

As such, CACIB argues that with some positives in the EUR price already, we could see some profit taking on the market EUR-longs after the ECB meeting.

For next week’s BoJ meeting, CACIB expects to cement the bank’s position as one of the more dovish G10 central banks. CACIB recommends staying short JPY vs USD into the BoJ meeting. 

Elsewhere, CACIB remains long AUD/NZD ahead of next week's Australian labor market data, noticing that it could add to the stream of positive data surprises and support AUD.

Source: Credit Agricole CIB Research