Forex: Credit Agricole says EUR/JPY is overvalued

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Credit Agricole’s (OTC:) FAST FX model indicated that the currency pair appeared overvalued, prompting the bank to recommend a sell trade. The model estimated that the short-term fair value of EUR/JPY fell from a record high of 163.9110 to 162.1633.

This change was attributed to an enhance in peripheral European government bond (EGB) yields relative to German Bund yields, as well as weaker performance of European equities compared to their Japanese counterparts and a decline in the trade relationship between the euro zone and Japan.

According to Credit Agricole, the current valuation of the EUR/JPY pair exceeds the threshold of more than two standard deviations from its estimated fair value. As a result, the bank initiated a currency pair sale transaction. They set a stop-loss level at -2.74% and a take-profit target at a converted fair value of 162.1633.

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The bank’s FAST FX model is expected to automatically close the trade at 10pm BST on Friday, May 17. The trade will be completed within this time unless the EUR/JPY pair reaches the take-profit or stop-loss level set by the bank before the specified deadline.

This move by Credit Agricole reflects its reaction to recent market events that have affected the valuation of the EUR/JPY currency pair. The bank’s analysis shows that the pair is currently trading above what its model considers sustainable, based on short-term fair value estimates.

This article was generated with the assistance of AI and reviewed by an editor. More information can be found in our Regulations.

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