We continue to look for opportunities to sell EURUSD on rallies between 1.3540 and 1.3570, particularly with USDJPY still comfortably above the 101.00 mark. Any noticeable dips in the latter to the 101.00-101.25 range will negate that view. Caveat: we suspect that the ‘bluff’ of a negative deposit rate on the part of the ECB is starting to fade. In other words, it is perhaps the case that market participants are realising that the ECB won’t actually take the step to cut the rate into negative territory, and instead is simply using the language as a means of maintaining a relatively weak EUR. If this bluff continues to be called by the market, it may be one impetus for the DXY to take a stab at levels sub-80.50.
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BMO