Veteran trader Peter Brandt disclosed on X that a short position on the EUR/JPY currency pair has become his trading firm's largest futures and FX holding. The trade comes as the euro trades at 175.65 yen in futures—down from an April high near 187.5—despite the European Central Bank (ECB) maintaining interest rates at double the level of the Bank of Japan (BOJ).
Key Takeaways
- Peter Brandt confirmed a EUR/JPY short is the top futures and FX position at The Factor Report.
- The ECB deposit rate sits at 2.5% following a September 10 hike, compared to the BOJ rate of 1.25%.
- Market swaps reflect an 80% chance of a December BOJ rate hike after Japan inflation cleared the 2% BOJ target.
- Joint US-Japan currency intervention on July 31 helped lift the yen to 157.57 per dollar from a low of 163.73.
Washington Intervention and Rising Japanese Inflation
Although the ECB pays 2.5% on deposits versus 1.25% at the BOJ, fundamental and geopolitical events have pressured the pair. On July 31, the US Treasury intervened directly by selling euros for yen alongside Japanese authorities. The ECB learned of the trade only after it took place, according to the Financial Times. This action pushed the yen up to 157.57 per dollar from a prior low of 163.73, as reported by CNBC.
Domestic economic data in Japan has further supported the yen. Statistics Bureau data shows Japan's core inflation reached 2.1% in September, moving past the central bank's 2% target. Overnight index swaps cited by the Japan Times currently price in an 80% probability of a December BOJ rate hike, though a hold is anticipated at the October 30 meeting. Japan's Finance Minister Satsuki Katayama recently described an undervalued yen as a problem, while US Treasury Secretary Scott Bessent indicated Washington would not hesitate to participate in future joint interventions.
Technical Breakdown Ahead of Central Bank Meetings
In Europe, the ECB raised its deposit rate from 2.25% to 2.5% on September 10, marking its second increase of the year. Energy shocks linked to conflict in Iran have elevated eurozone inflation, though ECB President Christine Lagarde stated policymakers are not committing to a predetermined rate trajectory. ECB officials will meet to decide policy on October 29, just one day before the BOJ announcement on October 30.
From a technical perspective, Brandt's chart indicates that EUR/JPY consolidated sideways through early 2026 before breaking below key support near 180. Data from Investing.com confirms the pair has remained below that level since late September. Brandt posted the chart without detailing specific fundamental targets, relying primarily on the technical setup.
Why It Matters
Brandt's aggressive short position underscores how macro traders are prioritizing central bank policy divergence and direct foreign exchange intervention over traditional carry-trade yields. If the BOJ proceeds with a rate hike in December while the ECB pauses due to fragile economic growth, yield spreads between Europe and Japan will narrow significantly. Moreover, explicit backing from both Washington and Tokyo signals that official intervention could cap any strong euro rebounds, creating a structural headwind for the pair.
