Risk appetite deteriorated again overnight despite aggressive rate cuts by a number of central banks, including the BoE, the EBC and the SNB. US stocks however traded lower, with the S&P500 down by 5%, and Asian stock markets this morning are also heading lower with Australia's S&P/ASX200 down by 4.3% so far at the time of writing. Falling yield differentials globally and deteriorating risk appetite pushed EURUSD, EURJPY and USDJPY lower. Think about, if rate spreads are contracting against EUR and JPY is maintaining a sustained rally on any hint of risk aversion and falling equity markets globally (-2 to -5% is common lately), than a short EURJPY is a well defined fundamental trend. I see further downside for this pair... Don't chase it. In fact, a deeper than expected US NFP or Retail Sales next week can offer a rally in which to sell. The challenge is the volatility on the pair make stop placement a challenge. To mitigate risk, take unleveraged position sizes like the smart professionals, not the dumb ones. Read More...

Tags: BOE