Euro: Support at 180 eyed against Yen on BoJ risk – DBS
DBS strategist Philip Wee argues that downside risk in EUR/JPY is less straightforward than in CHF/JPY.
DBS strategist Philip Wee has stated that the downside risk in EUR/JPY is not as straightforward as it is in EUR/CHF or EUR/GBP. Despite the Euro's strength against the Swiss Franc and British Pound, and the anticipation of rate hikes from both the European Central Bank and Bank of Japan, the Japanese Yen could potentially drop below 180 if the BoJ accelerates its normalization efforts.
The EUR's support is bolstered by its anti-USD trade, which is further strengthened by the USD debasement theme. Additionally, the relative hawkish stance of the ECB compared to its Swiss and British counterparts provides a synthetic tailwind for the Euro. While markets are pricing in a 95-100% probability of rate hikes at both the ECB and BoJ meetings, a rapid normalization by the BoJ could push EUR/JPY below its psychological support level.
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