JPY: Staying Core Short EUR/JPY; If Breaks Above 120, Double Down Via Fresh Short GBP/JPY – SocGen


What is the structural bias for JPY, specifically EUR/JPY and GBP/JPY?

Here is their view, courtesy of eFXdata:

Societe Generale Research maintains a structural bullish bias on JPY via core short EUR/JPY. SocGen looks to rotates from short EUR/JPY to short GBP/JPY if EUR/JPY rises back above 120.

The Macron/Merkel package is proposal, but only a proposal, to take a step in the right direction. So it’s a tantalising prospect but not more. In concrete terms, Europe’s inability to build sensible economic architecture keeps the EUR/USD rate over 20% below PPP. Fix that and EUR/USD will average 1.30 for the next decade.

This proposal isn’t a fix of any kind yet. For now, it’s just something to shake out euro shorts, against the yen as much as the dollar. We will go on bumping along the bottom of the post-2014 range, and within the post-2008 downtrend, for a while longer,” SocGen notes.

“In practical terms, we’ll stick with EUR/JPY shorts unless we break 120.  If EUR/JPY does break 120, while the UK continues to rule out any extension to Brexit negotiations, we’ll be sorely tempted just to double down with fresh GBP/JPY shorts,” SocGen adds.

For lots more FX trades from major banks, sign up to eFXplus

By signing up for eFXplus via the link above, you are directly supporting Forex Crunch.
Get the 5 most predictable currency pairs

About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.