European Open - 21.1.16

The Nikkei sell-off is increasing the odds that the BoJ might act at its meeting next week. This is contributing to nervous trade: you don't want to fight the BoJ. Yesterday there were sources citing the BoJ is "checking prices", so be cautious on the Jpys.

Looking forward: enter the ECB.  No policy changes are expected but the market is still expecting somewhat of a dovish slant from Draghi. While it's true that the drop in Crude will lead to lower inflation expectations, there has been some  improvement in the Eurozone economy since the last meeting (manufacturing, services, unemployment for example). I still sense topside risk if Draghi sounds more optimistic than expected. EurGbp and EurCad longs would be my preferred play under that scenario. Vice versa, if Draghi delivers a more dovish outlook, EurJpy shorts would be my weapon of choice. Just stay cautious on the Jpys as the BoJ is "checking prices".