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Mar 07 - 09:55 AM

ING: Advocating for Selling EUR/JPY Amid BoJ Rate Hike Speculations

By eFXdata  —  Mar 07 - 08:52 AM

Synopsis:

ING suggests that now may be an opportune time for investors to consider selling EUR/JPY. The recommendation is based on the evaluation of currency valuations, which indicates that the yen is more undervalued than the euro. Additionally, the Bank of Japan (BoJ) is seen as gearing up for a rate hike, with significant Japanese wage data due on March 15 potentially fueling further rate hike speculations. While some market participants speculate a rate hike as early as March 19, ING considers an April 26 hike more likely, though it acknowledges the increasing discussions for an earlier move.

Key Points:

  • Yen Valuation: ING's models suggest the yen's undervaluation relative to the euro, positioning the yen for potential strengthening.
  • BoJ Rate Hike Anticipation: Upcoming wage data and BoJ's readiness for a rate hike contribute to the speculation of tightening monetary policy, influencing the EUR/JPY pair.
  • Speculation Timing: Although there's chatter about a possible March rate hike, ING views the April 26 meeting as a more realistic timeline for BoJ action.

Conclusion:

Given the yen's undervaluation and impending monetary policy shifts in Japan, ING sees a strategic opportunity in shorting EUR/JPY. The firm targets a move towards 160 in the short term, anticipating a more pronounced decline below this level once rate hike expectations solidify further. Investors are advised to closely monitor upcoming wage data and BoJ communications for further cues.

Source:
ING Research/Market Commentary

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