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Forex pairs in this Article » USD/JPY (Barcelona) - As the US Eastern seaboard recovers from one storm, Jens Nordvig and Saeed Amen take a look at the economic clouds gathering across the world.

Looking at the devastation caused by Hurrican Sandy it is understandable that markets have been relatively quiet ahead of Non Farm Payrolls and the US Presidential election next week. So far this week, USD was weaker against G10 but more mixed against EM's with Equities pushing higher.

They note that the BoJ eased policy for the second time in as many months with results generally in line with market expectations. They believe that "in the near term the recent rise in USDJPY spot may lose momentum, although we maintain a bullish view medium term." They feel that the upcoming departure of the BoJ's Shirakawa could lead to quite a radical shake up in BoJ's policy, caused by impending political regime change. The LDP's Abe's election could lead to the bank becoming more proactive in its approach to challenges.

When looking at the dynamics of currency modeling in the event of a EZ break up, they note that although the risk has declined recently, it is still a longer term possibility. Their new empirical model suggests that real effective currency depreciation after a Greek exit could peak at 60%.

Looking to the antipodes, they comment that they have been bearish on AUD due to the shift in Australia's basic balance position from positive to negative. In trading terms, they have been waiting for better levels to sell AUD, allowing for very bearish Chinese expectations to normalise.
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