The U.S. dollar has made strong inroads against both the Japanese yen and the euro. What is the outlook for EUR/JPY?
Bank of America Global Research discusses EUR/JPY outlook and recommends going short via buying 3mth 117/113 put spread in 1×1, using spot ref 118.5.
“We are selling EUR/JPY: We believe JPY will be supported by domestic flow, potential success in containing COVID-19, and the BoJ’s lack of ammunition, while EUR would be undermined by the COVID-19 outbreak in Europe and as unwinding of EUR-funded carry trades may have run its course. Essentially, we are expecting JPY/USD and EUR/USD correlation to break,” BofA notes.
“Risks to the trade are more-than-expected “unofficial intervention” by Japanese public institutions, such as the Government Pension Investment Fund (GPIF),” BofA adds.
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