Consider selling EUR/JPY this week, advises Citigroup in its weekly FX pick to clients.
"JPY remains vulnerable to swings in risk sentiment. In addition to demand for JPY as a 'safe-haven' currency, overseas investors who invest in Japanese equities with neutral FX position are forced to buy back the yen as the Nikkei declines. Given the mixed response to the US employment data last week and the re-opening of Chinese markets following the long weekend, there will be potential for some further JPY-positive volatility," Citi says as a ratiole behind this call.
"EURJPY represents an attractive vehicle for JPY longs, since the boost to the currency from dislocations in emerging markets may stand to fade and ECB dovishness could weigh more heavily. The ECB stance last week opened asymmetry in how clients view the EUR. We continue to expect that EUR topside is limited," Citi adds.
In line with this view, Citi recommends selling EURJPY from 132.75, targeting 130.15, with a stop loss 134.15.
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