Dovish commentaries from European Central Bank (ECB) has successfully paused recent selloff that has wiped out more than $15 trillion from global stock market in valuation. While Nikkei, which is up almost 6%, benefitting from the pause, Yen is out of demand.
Yen has crawled back more than 200 pips gain in last two days, most of it coming after ECB commentaries.
However, we feel ECB commentaries have temporarily halted decline in global stocks, rather say risk aversion, because the fundamentals that have been fuelling rout, haven't abated yet.
Oversupply that has been fuelling crude oil rout is still there, only the focus has shifted temporarily. On the other China's debt problem is real and intensifying.
So, we remain bullish on Yen, however at lower price due to ECB's outlook.
At this point, we feel there could be further recovery in global stock market and Yen could retreat to as high as 119.8 against Dollar.
