Bank of America Merrill Lynch FX Strategy Research promotes long NZD/JPY position on the ground of the following 4 reasons:
1- "Short NZD is the most stretched short position in G10 FX.
2- Our data analysis flags upside risks for NZD/JPY.
3- Domestic flow dynamics is becoming more supportive for USD/JPY and cross-yen pairs.
4- We believe that the RBNZ’s dovish stance is not sustainable,“ BofAML notes.
Risks: "a global shock or new concerns about China,” BofML adds.
In line with this view, BofAML recommends buying NZD/JPY via options – a 3-month NZD/JPY 82/85 call spread.
NZD/JPY is trading circa 78.50 as of writing.
Source: Bank of America Merrill Lynch Rates and Currencies Research
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