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      MUFG Issues Short EUR/JPY Recommendation Amid French Bond Market Concerns

      MUFG has recommended a short position on the EUR/JPY currency pair, suggesting an entry point at 177.50 with a target of 172.00 and a stop-loss at 181.50. The bank's analysis indicates that the current dynamics in the euro-area bond market, particularly the widening spread between French and German bond yields, are likely to diminish the European Central Bank's (ECB) inclination to raise interest rates aggressively. This comes as the ECB has seen a reduction in hike pricing by approximately 30 basis points from its peak, following comments from ECB President Christine Lagarde regarding the impact of higher long-term yields on growth and inflation.

      On the other hand, the Bank of Japan (BoJ) is expected to implement another rate hike before the end of the year, which could narrow yield differentials with the euro area. This potential tightening, combined with safe-haven demand for the yen, positions it favorably against the euro. MUFG noted that the EUR/JPY pair has regained downward momentum after falling below the 180.00 mark in recent weeks, and further risk-off episodes could accelerate unwinds of carry trades funded in yen.

      The ongoing turmoil in the French bond market, characterized by forced selling, poses a risk to the euro's stability. Should the situation stabilize or if the French budget is passed smoothly, a short-covering rally in the euro could occur. However, the current market sentiment remains cautious, particularly with the added pressure of rising energy prices due to the ongoing conflict in Iran, which could further impact Japan's import costs and temper the yen's gains.

      © 2026 KLEA News. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

      Source: KLEA News

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