7 Aug 2015
EUR/JPY: a selling opportunity below 138.10 stop? - BNP
FXStreet (Guatemala) - Analysts at BNP Paribas explained that they believe the EUR is currently overvalued and see an opportunity in shorting EUR/JPY.
Key Quotes:
"EUR momentum is subdued (+12) and has failed to pick up significantly even during bouts of EUR rallies this year
As we expect USD/JPY to continue to trade in a sideways pattern, short EURJPY is a better way to express a JPY bullish view.
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 overvaluation in our opinion.
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. Such deviations tend not to be sustained.
We initiate a short EURJPY trade recommendation at 136 targeting a move to 130. We place a stop at 138.10."
Key Quotes:
"EUR momentum is subdued (+12) and has failed to pick up significantly even during bouts of EUR rallies this year
As we expect USD/JPY to continue to trade in a sideways pattern, short EURJPY is a better way to express a JPY bullish view.
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 overvaluation in our opinion.
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. Such deviations tend not to be sustained.
We initiate a short EURJPY trade recommendation at 136 targeting a move to 130. We place a stop at 138.10."