EUR/JPY: Double top at 126.76, looking to extend losses – MUFG

Analysts at MUFG Bank, recommend a trade idea of shorting the EUR/JPY pair with an entry-level at 125.30 and a target at 122.80 with a stop-loss at 127.20. They warn that long EUR/JPY positions could be vulnerable to a squeeze. 

Key Quotes:

“The pair has just put in place at double top at 126.76. President Abe’s decision to resign has introduced fresh uncertainty over the sustainability of Abenomics policies. The uncertainty is unlikely to go away in the near-term. The heightened uncertainty will encourage speculative JPY demand and more JPY volatility. We prefer to put on the long JPY position against the EUR where long positions are already elevated thereby increasing the risk of squeeze. Recent EUR price action has also been poor. It has failed to rise to new highs vs USD following the Fed’s policy update which is disappointing.”

“We remain of the view that it is overvalued and overdue a deeper correction lower although hold less conviction of that view against the USD. Rising COVID cases in the euro-zone and the increasing risk of more economic disruption are gradually undermining the current bullish outlook for the EUR.”