Morgan Stanley 'trade of the week' is to sell EUR/JPY

Morgan Stanley's G10 trade of the week idea is to sell EUR/JPY

The cite:

• ECB's Draghi has sent an important signal that the ECB would like a weaker EUR
• MS economists expect the ECB to respond in December, cutting the deposit rate by 10bp, adding 05bn per month extra of purchases and extending the purchase programme to March 17
• While the BOJ is keeping its purchase target constant last week signalled some diverging monetary policy between the two banks

"We believe that there could be a new paradigm in relation to US yields. Higher US bond yields could potentially lead to EM volatility and related repatriation flows. Since JPY tends to benefit from repatriation flows more than USD, it suggests a lower USDJPY, supporting our short EURJPY trade"

"We like to sell EURJPY at 133.70

Target of 129.00 and stop at 135.00"