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SocGen Recommend Long EUR/JPY Via Options

EURJPY
  • SocGen issue new trade recommendation for EUR/JPY, seeing plenty of upside potential in the cross.
  • They write that inflation divergence will continue to cheapen the JPY in real terms, but with US real yields 60bp higher than they were at the start of the year, USD/JPY has plenty of scope to push higher as inflation rises elsewhere and central banks talk tough.
  • They add that the EUR/JPY skew remains firmly oriented towards puts, with a bit of positive skew on the OTM calls side too. As such, they recommend buying a EUR/JPY 3m costless seagull with 129/135/139 strikes.
  • The structure is long theta, so unless spot quickly falls, it should be kept until expiry to get the maximum possible leverage.
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