EUR/JPY to march foward into 2022, dips below 130 to be temporary – ING

Speculation over possible ECB tapering has seen EUR/JPY more than recoup the early August sell-off. Although the European Central Bank is expected to wait to taper, economists at ING believe the EUR/JPY pair is set to be supported into 2022.

EUR/JPY to stay supported

“It may be too early for the ECB to taper and thus EUR/JPY risks a move sub-130. But overall, we are mildly pro-risk and bullish EUR/JPY into 2022.”

“The FX options market provides some insights into how markets price event risks. ECB meetings normally see 50% more volatility than normal priced in. German elections Sep 26th see 30-40% more volatility than normal. The big deal is French elections next year where 4X normal volatility is priced for late April 2022.”

“Probably there will be some short, sharp equity correction in 4Q21 (Chinese default?), but we suspect EUR/JPY dip is bought.”