Risk sentiment has deteriorated steadily since the headlines around Cyprus first appeared. This is seen in the form of a bid in major rates markets, not just in Germany, but also in the US. The recent pullback and test of resistance areas in US yields is likely catalysing profit taking in USD/JPY, which dipped below support areas on strong volume despite the London holiday yesterday. We are allowing for further downside, but we ultimately view the pullback as a healthy correction. In line with this, EUR/JPY is also likely to revisit its February lows.
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Barclays