Credit Agricole Suggests Selling EUR/JPY Amid Overvaluation
Currency Pair Evaluation:
Credit Agricole’s FAST FX model detected that the EUR/JPY currency pair is currently overvalued, prompting the bank to recommend a sell trade. The model indicated a decrease in the short-term fair value of EUR/JPY from 163.9110 to 162.1633.
Factors Influencing the Shift:
The decrease in fair value was influenced by the rise in European Government Bond (EGB) peripheral yields compared to German Bund yields, European equities underperforming against Japanese counterparts, and a decline in the Eurozone-Japan terms-of-trade ratio.
Credit Agricole’s Recommendation:
Based on the model’s analysis, the EUR/JPY pair is trading more than two standard deviations above its estimated fair value. Therefore, the bank has initiated a sell trade with a stop-loss level at -2.74% and a take-profit target at 162.1633.
Trade Details:
The bank’s FAST FX model will automatically close the trade at 22:00 BST on Friday, May 17. The trade will end at this time unless the pair reaches the set take-profit or stop-loss levels before the specified date.
Response to Market Developments:
Credit Agricole’s decision reflects recent market changes impacting the EUR/JPY valuation. The bank’s analysis suggests the pair is currently trading above a sustainable level according to short-term fair value estimates.
This article was created with AI assistance and reviewed by an editor for accuracy and clarity.
