15 Jun 2015
EUR/JPY remains a sell – SG
FXStreet (Barcelona) - Kit Juckes of Societe Generale, explains that EUR and JPY positioning contrast suggests a sharp bounce might be seen on the Japanese Yen on risk aversion, and hence suggests selling EUR/JPY.
Key Quotes
“The yen and euro are both undervalued relative to long-term models of purchasing parity or fundamental economic equilibrium. That's not surprising because what matters these days is monetary policy divergence, rather than 'value'. But the yen's a lot more undervalued than the euro and the tide of news just doesn't justify that.”
“Last week's CFTC FX positioning data show euro shorts being cut back further. The latest bout of choppy range-trading has cleared out a lot of the excess. It's almost a green light for euro bears as the Greek news remains depressing. But the contrast with yen positioning is striking. Euro shorts have been cut as yen shorts grow. There are enough yen shorts now to deliver a sharp bounce on risk aversion (say, a hawkish message from the FOMC on Wednesday). That would be a double-whammy for EUR/JPY.”
Key Quotes
“The yen and euro are both undervalued relative to long-term models of purchasing parity or fundamental economic equilibrium. That's not surprising because what matters these days is monetary policy divergence, rather than 'value'. But the yen's a lot more undervalued than the euro and the tide of news just doesn't justify that.”
“Last week's CFTC FX positioning data show euro shorts being cut back further. The latest bout of choppy range-trading has cleared out a lot of the excess. It's almost a green light for euro bears as the Greek news remains depressing. But the contrast with yen positioning is striking. Euro shorts have been cut as yen shorts grow. There are enough yen shorts now to deliver a sharp bounce on risk aversion (say, a hawkish message from the FOMC on Wednesday). That would be a double-whammy for EUR/JPY.”