USD: Softer US Yields Cap USD/JPY, Put A Floor Under EUR/USD; What's The Trade? – SocGen

Societe Generale FX Strategy Research notes that the divergence between US real yields and the dollar continues.

“DXY peaked at the same time as DXY-weighted relative real yields did, and both are falling. It’s just that the dollar is falling a bit faster than a dumb regression would suggest. That has now been true for just over three months and isn’t likely to change quite yet.

The softer tone to US yields caps USD/JPY, but puts a floor under EUR/USD,"SocGen argues. 

In line with this view, SocGen recommends staying structurally long EUR/JPY for a move towards 140, with the next leg up probably coinciding with another leg up towards 1.16 in EUR/USD.

Source: Societe Generale Cross Asset Research

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