EUR/JPY is seeing a steady short-covering bid this afternoon using the logic that if it isn’t going down today it probably isn’t going down anytime soon. As discussed earlier, Japanese retail investors are now short EUR/JPY, which runs counter to their traditional leanings toward being long currencies in the hope of picking up yield. With yields in the US, Europe and and UK near all-time lows, the incentives for investors to stay short their native currency is way lower than normal.
Now that they have the risk-aversion trade on, and it is not acting as it typically does, some of those investors and traders are throwing in the towel and covering shorts in USD/JPY and EUR/JPY. It is hard to blame them.
Stops-loss buy orders in EUR/JPY are seen clustered in the 116.60/65 region and around 93.05/10 in USD/JPY.