Danske Bank FX Strategy Research stay constructive on EUR/JPY over the coming months on the ground of further diverging monetary policy expectations.
“We expect the ECB to deliver only a minor hawkish twist at its July meeting, which, if anything, could add to the upside risks for EUR/JPY.
According to Danske Bank’s MEVA model, EUR/JPY still trades below the model’s fair value of 133. Hence, from a fundamental point of view, the case for further EUR/JPY gains remains intact for now,” Danske argues.
Danske expects the cross to trade in the range of 127-131 in the coming months, targeting 128.8 in 1-3M.
“Longer term, we expect EUR/JPY to continue higher driven by real interest rates and portfolio outflows out of Japan, as we expect the ECB to move towards monetary policy ‘normalisation’ before the BoJ. We target EUR/JPY at 133.4 in 6M and 136.88 in 12M,” Danske adds.
Source: Danske Bank Research
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