Insight from ING daily fx strategy :

USD: European FX vs JPY (and USD) divergence 
USD is recovering its previous week’s losses against European FX largely due to the politically driven EUR downside (while for SEK and NOK their declines are further exaggerated by some of the justified correction following what looked as their previously not fully justified gains – see SEK: Getting ahead of itself). We expect the divergence between European FX (weakness) and JPY (strength) to
continue this week as we approach Friday’s Trump-Abe meeting and potential talk about undervalued JPY (note the ING BEER fair value estimate of USD/JPY is close to 100). There is more downside to USD/JPY this week.

EUR: EZ politics slowly creeping into the euro
EUR/USD is reversing its recent uptrend as the clouded EZ political outlook starts being slowly reflected in EUR. The French-German sov spread reached new multi-quarter highs yesterday (after Le Pen launched her Presidential campaign over the weekend) while EUR/CHF is flirting with its low last month of 1.0640. As EUR/USD is pricing virtually no political risk premium on either the
spot or volatility sides (see yesterday’s FX Daily), there is more scope for downside. We note that speculative short EUR/USD positioning is at the lowest level since May 2016 (11% of open interest based on CFTC data, with the data not reflecting the post Feb FOMC EUR/USD short squeeze), suggesting a less bumpy road for EUR/USD decline. EUR/USD to largely trade below 1.0700
today (today’s disappointing December German IP should reiterate this trend).

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