This cross, after notching a recent high, moved lower the last two trading sessions of this week as nervousness over the US fiscal cliff issue brought about selling in the crosses at the expense of the Euro and some of the other "risk" currencies. That allowed a bit of a safe haven bid to come into the yen and pushed some shorts out of that market allowing this particular cross to move lower.
If the cliff issue begins to look as if there is not going to be any sort of agreement worked out before the end of the year, we could see some further safe haven flows into the Yen at the expense of this cross pushing it lower.
That being said, if traders become more and more convinced that next year, the global economy will improve, we will see a strong appetite for risk and I suspect this cross will move higher. If it does, my guess is that the Yen carry trade will be quite large and this should produce a rather healthy appetite for "risk" assets such as commodities in general.
The thing to keep in mind about this commodity trade will be that while there will be general fund flows into the entire sector, those commodities with STRONGLY BEARISH supply/demand scenarios will still move lower. The fund flows will slow the descent from an otherwise faster rate but the price will still move lower in those sectors which have an oversupply or lack of demand factor.
In other words, we will see the CCI ( Continuous Commodity Index ) move higher with specific commodities either outperforming it or underperforming it depending on their own specific set of fundamentals. Either way, I would expect silver to be one of the outperformers, especially if copper resumes its uptrend which was derailed this week.
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