Danske Research discusses EUR/JPY outlook and adopts a strategic bearish bias vis short exposure in spot targeting a move towards 121.
"We now see strategic value in a short EUR/JPY spot position on a peak in global manufacturing activity, positioning unwind, risks to terms-of-trade and a domestic macro catch-up story in Japan...
Positioning data implies speculators are well long EUR/JPY and we see such as a downside risk to spot. In addition, risks are increasingly tilted to a JPY-favourable terms-of-trade shock as the global pace expansion settles down, via lower commodity prices," Danske notes.
"The biggest risks to this trade are a sudden boost to reflation trades including a risk-on induced bearish steepening of global yield curves," Danske adds.