7 Aug 2015
Short EUR/JPY: better way to express JPY bullishness – BNP Paribas
FXStreet (Mumbai) - The FX strategy team at BNP Paribas believes JPY bullishness could play out better through the downward move in the EUR/JPY pair as the common currency appears overvalued, while the JPY is likely to continue its sideways action against the USD.
Key Quotes
“Short EURJPY is fully consistent with our FX forecasts which target a move towards 130 around the year end. Much of this move will be driven by the EUR’s current over valuation in our opinion.”
“The EUR is currently overvalued. EUR momentum is subdued and has failed to pick up significantly even during bouts of EUR rallies this year. One important factor which supports this view is the 2-year swap spread measure which already signals that EURJPY is overvalued and should be trading closer to 130. The divergence between the currency cross and rate spread has been in place since mid-July.”
“As we expect USDJPY to continue to trade in a sideways pattern, short EURJPY is a better way to express a JPY bullish view.”
Key Quotes
“Short EURJPY is fully consistent with our FX forecasts which target a move towards 130 around the year end. Much of this move will be driven by the EUR’s current over valuation in our opinion.”
“The EUR is currently overvalued. EUR momentum is subdued and has failed to pick up significantly even during bouts of EUR rallies this year. One important factor which supports this view is the 2-year swap spread measure which already signals that EURJPY is overvalued and should be trading closer to 130. The divergence between the currency cross and rate spread has been in place since mid-July.”
“As we expect USDJPY to continue to trade in a sideways pattern, short EURJPY is a better way to express a JPY bullish view.”