We add a 3 week 104.50 EUR/JPY One-Touch at 18%
The outlook for the euro-zone is very dark absent far-reaching political measures to further integrate the Economic and monetary union. The political process however is slow moving and the need for policy support is urgent. The outcome of the Greek election is also very uncertain and ultimately the Greek euro membership. However, markets are now record short the euro vs. the defensive currencies and are vulnerable on any deliverance of additional policy support. Already this afternoon on the back of weak labour market data, markets may be given a first shot in the arm as Ben Bernanke is speaking before the Congress. Although we expect the Fed to deliver additional easing in August the probabilities have increased for QE3 already in June. Furthermore we have long expected Spain to receive a bail-out package aimed at the struggling banks which is likely to come sooner rather than later. The downward trend in EUR/JPY is also very stretched according to our technical and quantitative measures and a further correction higher looks likely. Given all these “possible” measures we find the risk reward to buy EUR/JPY appealing through options.
SEB tech team