We think that the fear of broader global risks now appears to outweigh worries about further BoJ policy easing. Given concerns on limits of the policy arsenal at the BoJ and rising euro-centric risks (see Overview section above) we recommend initiating short EURJPY positions, preferably via options ahead of the March and June ECB meetings, despite acknowledging the recent uptick in the implied volatility of JPY crosses. Technically, our bearish view for EURJPY was encouraged by the break below 126.00, near the 2015 lows. Lack of upside traction following the January uptick points to further weakness in the coming weeks. We are looking for a move below support in the 125.00 area to open our targets near 122.00 and then lower towards 118.75.
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