EUR/USD, USD/JPY, DXY flows: Main themes continue prior to end of week event risks

Similar themes still dominating, with Brent testing $100 on the latest US-Iran exchanges but a different dynamic still evident in FX - USD/JPY remaining weighed, looking to re-test yesterday’s lows and the key support just below, and that still leaking into some broader dollar erosion. So still that shift in leadership from oil dragging the yen and bolstering the dollar to yen dominated action.

Aside from the broader themes, it’s a fairly quiet day ahead, prior to the upcoming event risks from ECB, and US PPI and CPI data closing out the week. Current developments will tend to be keeping the ECB on the hawkish side given developments are nudging more towards the adverse than the favourable scenario and the wider energy complex continues to feel pressure. Next couple of days could see some headline choppiness through all the above, given also upside US inflation risks. But ultimately the key factor may be the extent to which recent JPY action is indicative of some larger position adjustments currently being worked, and how long the buying can push the current overbought action.