EUR/JPY: Recent highs of 159-160 should mark a peak – UBS

Economists at UBS analyze EUR/JPY outlook.

Yield pickup in EUR/JPY

We reiterate our belief that the recent highs of 159-160 in EUR/JPY should mark a peak. This favors selling the upside risk above these levels for a yield pickup.

We expect the yield differentials to stabilize and to narrow next year. The Bank of Japan has signaled greater concern over the weakness of JPY and signaled that it could consider further policy normalization.

With the Japan authorities leaning against further Yen weakness, we think the upside risk for EUR/JPY to rise significantly beyond 160 looks rather limited.