EUR/JPY - Euro to Japanese yen

EUR/JPY, or euro to Japanese yen, is a heavily traded currency pair. The Eurozone is the world's second largest economic region while Japan is the world's fourth-largest economy. As a safe haven currency, the yen tends to depreciate when global economic growth is high while sharply appreciating during downturns. The euro, on the other hand, tends to move in the opposite direction. Thus, the pair is often seen as a proxy for global sentiment. Prior to the French elections of 2017, investors went short EUR/JPY in order to hedge their long euro positions. Following the elections, the pair strengthened sharply as optimism returned to the Eurozone. 

Outlook
Neutral

Euro to Japanese yen Outlook

Outlook
Neutral

Updated 

Euro analysis

Euro vulnerable as slowing growth reveals underlying issues

In our last commentary on the euro in late August, we wrote that the common currency was set to weaken further thanks to (1) slowing growth, (2) slowing inflation and (3) an outsized speculator long position in euro futures and options. Following the publication of our last commentary, EUR/USD has weakened from 1.1730 – 1.180 (the top-end of its trading range that we update daily on our...

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Tags: Euro

Shorting the euro remains a great opportunity as European downturn worsens

In our last take on the euro in April, we wrote that the bullish case for the currency was running out of drivers. Specifically, we wrote that decelerating Eurozone growth (in rate-of-change terms), changes in trading patterns and overly bullish speculator sentiment was likely to weigh on the euro in the future. At the time, EUR/USD was trading around 1.23, near its 2018 high just above 1.2550. 

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Tags: Euro

ECB preview: rising risks as consensus goes all-in

Earlier today, we downgraded our euro outlook to neutral in the medium-term, and bearish in the short-term. As the euro runs out of momentum, the trend is now neutral based on quantitative factors such as price, trading volumes and volatility. While forward-looking economic indicators continue to suggest an ongoing expansion, growth appears to be slowing in rate-of-change terms. This is why our p…

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Tags: Euro

Japanese yen analysis

Japanese yen: safe haven or inflation proxy?

In our last commentary on the Japanese yen, we wrote that the currency was looking excessively weak against the euro. In particular, we stated that bullish catalysts driving EUR/JPY were at risk as speculator positioning in both long euro and short yen trades were looking extreme. In addition, we flagged changes to the Bank of Japan’s “yield curve control” program as a potential risk for yen stre…

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Tags: Japanese yen

EUR/JPY: An “easy” long idea gets trickier

In early 2017, doubts regarding the integrity of the Eurozone led many to take refuge in the Japanese yen. Unlike the euro, the Japanese yen exhibits classic safe haven characteristics and tends to strengthen during downturns. Following the Brexit referendum vote and US presidential elections, few were willing to bet on opinion polls that predicted Macron’s victory. Similar to political events in…

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Japanese yen: Bank of Japan versus interest rates

Japan has suffered from weak growth and inflation since the global financial crisis, and the Bank of Japan has frequently experimented with unorthodox monetary policies. In September 2016, the BoJ decided to directly target long-term interest rates. The so-called “yield curve control” (YCC) program fixed 10-year Japanese government bond (JGB) yields at 0%. If yields deviated from the BoJ’s target…

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Tags: Japanese yen

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