It's no time for "tiers"
Updated
What are we trading?
Adding short exposure here is recommended as EUR volatility fades into the distance via flight to quality (USD) flows. A strategic short in EURJPY outguessing no new announcements in April from ECB and a continuation of focus on further easing and details of the new TLTROs and whether we will see the 'tiered' system.
The ECB will likely keep us waiting till June before announcing the final details (anything sooner will be extremely dovish as it will cause severe tightening in credit across the periphery).
On the 'tiered' systems... Draghi will no doubt be pressed on this. A tiered system will ease net interest margin squeeze for banks, but without a risk of credit tightening there is little to be achieved from a monetary perspective here. I only see a move to a tiered system happening if/when they finally bend the knee admitting rates need to be at current or "lower" levels for an extended period. To put simply, as long as we have a glimpse of hope in reaching the inflation target being this will not happen.
From the technical side here we are tracking a very simple 5th and final wave in the sequence. For those who have been following updates on EURJPY since the original mention of this flow (see attached: "Bears (almost) ready to attack again....getting ready to swing") you will know we are in the last pages of the Yen repatriation chapter.
Best of luck all those positioning on the sell side... thanks for keeping the likes, comments and etc coming
Adding short exposure here is recommended as EUR volatility fades into the distance via flight to quality (USD) flows. A strategic short in EURJPY outguessing no new announcements in April from ECB and a continuation of focus on further easing and details of the new TLTROs and whether we will see the 'tiered' system.
The ECB will likely keep us waiting till June before announcing the final details (anything sooner will be extremely dovish as it will cause severe tightening in credit across the periphery).
On the 'tiered' systems... Draghi will no doubt be pressed on this. A tiered system will ease net interest margin squeeze for banks, but without a risk of credit tightening there is little to be achieved from a monetary perspective here. I only see a move to a tiered system happening if/when they finally bend the knee admitting rates need to be at current or "lower" levels for an extended period. To put simply, as long as we have a glimpse of hope in reaching the inflation target being this will not happen.
From the technical side here we are tracking a very simple 5th and final wave in the sequence. For those who have been following updates on EURJPY since the original mention of this flow (see attached: "Bears (almost) ready to attack again....getting ready to swing") you will know we are in the last pages of the Yen repatriation chapter.
Best of luck all those positioning on the sell side... thanks for keeping the likes, comments and etc coming
Note
Eyes here for ECBNote
Not surprised we are sitting right on 125.225 for ECB...
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