Despite a bit of a bounce EUR/JPY has slid quickly this week.
TD says there is more downside to come, re targeting 110 (their stop loss is above 119.50)
Citing (this in summary):
- balance of payments among the USD, EUR and JPY
- BOP will be magnified in this pandemic
- As the crisis evolves, the BOP will capture many of the elements associated with this pandemic shock ranging from trade/supply chain disruptions.
- in the coming months … Covid-19 will rupture trade balances and redistribute capital flow
- EUR will suffer … because the EUR's current account surplus is primarily driven by trade, which is almost entirely because of Germany … Germany masks much weaker member states
- JPY should enjoy a stickier bid given its large - primary income driven - CAB surplus
- will result in a strategic pull lower in EURJPY
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The EUR/yen downtrend has been in place (on a longer term perspective) since early 2018 … I do wonder how much further it has to slide?
