EUR/JPY has this week retested 12-month lows around 122 – sharply lower than the highs above 140 reached in June 2015, notes BNP Paribas.
"We believe these levels represent attractive buying opportunities. There is little rationale for the sharp appreciation of JPY vs EUR to produce the year’s low.
We maintain long EURJPY exposure in our portfolio via an options structure but highlight that the return to the year’s low represents an opportunity to again enter long exposure towards our target of 127 and even our end of year target of 131," BNPP advises.
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"The most prominent FX theme of 2016 so far has been to fade USD strength as the Fed rate hike cycle stalls. We do not believe the Fed will hike rates during 2016. Both the BoJ and the ECB are targeting very loose monetary policy aimed at boosting inflation expectations and would very probably prefer currency weakness to facilitate this process.
Both long EURJPY and USDJPY appear attractive at current levels, EURJPY has the advantage of eliminating shifts in Fed expectations," BNPP adds.