Currency investors should consider buying EUR/JPY this week, advises CitiFX and Morgan Stanley in their weekly FX picks to clients.
"Fed Fischer’s weekend comments were somewhat more dovish than we’ve seen over recent months, indicative of a more globally integrated Fed. This should be good for risk and support JPY crosses.
Into the ECB meeting next week, this could lead more paring back of short positions to the extent they still linger.
In addition to the latest recovery of the risk appetite in the markets, we believe anticipation for a BoJ move could mount and JPY selling by investors could pressure the Japanese currency as the Oct 30 meeting comes closer. Though Governor Kuroda has still kept a conservative position, the deterioration in economic statistics (evident from Citi’s ESI) suggests confidence could soon waver," Citi says as a rationale behind this call.
In line with this view, Citi recommends buying EUR/JPY from 136.58, with a target at 139, and a stop at 135.
Morgan Stanley recommends buying EUR/JPY from EUR/JPY 136.40, with a target at 141.00 and a stop at 134.70.
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