Risk has been all the rage the last 36-48 hours or so but dealers are pairing things back a bit ahead of the US employment report. EUR/JPY brushed 135.00 overnight but is retrenching now, down to 133.80. Same story for USD/JPY, which reached 100.17 in Asia, triggering barrier options and absorbing large offers at 100.10 before running out of steam.
The market looks vulnerable to an “upside” surprise in the US employment report. “Upside” in this case is a matter of degree; less negative, is about the best one can hope for. With estimates geared heavily to the downside, a drop of a half-million jobs could set off a big bout of risk assumption which would lift the EUR/JPY further.
