Citi recommends selling EUR/JPY this week

The trade of the week from CitiFX

Consider selling EUR/JPY this week, advises CitiFX in its weekly FX pick to clients.

"...Although this is a weekly position, for longer-term investors we would note that if the ECB remains credible, there should be room for additional EUR weakness on Real Money adjusting benchmarks, renewed corporate issuance and further investor displacement all of which are EUR negative.

...Since we doubt that this week s BoJ speakers will signal imminent easing, JPY is likely to benefit from the anticipation on ECB action. Citi expects the BoJ to take action at the late January meeting, but it should be premature for investors to position ahead of this, particularly before the publication of the Tankan report in mid-December. While investor risk appetite seems to be improving, coming Fed lift-off may govern further gains, which would be supportive for JPY," Citi says as a rationale behind this call.

in line with this view, Citi recommends selling EUR/JPY from 129.85, with a stop at 131, and a target at 127.

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