Lat week, Credit Suisse advised clients to consider tactical JPY longs (short EUR/JPY) in order to position for risk-intolerant markets. With the ongoing risk-off mode, CS maintains this view advising to broaden out with a tactical short AUD/JPY position. The following are the key points in CS' rationale behind this view.
- The last several trading sessions have seen concerns over global growth grow louder, contributing to a risk-off tone in the market – causing VIX to spike and calling into question the timing of the Fed’s removal of monetary accommodation
- Government yield spreads are also consistent with a strong yen in the near term. While the relationship between USDJPY and 5-year government rate differentials has been volatile in recent years, to the extent that Vice Chair Fischer’s comments and the global macro backdrop weigh on US yields, we would expect this to exert downward pressure on USDJPY .
- Finally, though considerable text has already been dedicated to the sharp decline in euro area inflation expectations – having broken through decade lows – additional ECB action and EUR weakness appears likely
"Taken together, these factors reinforce our call to sell EURJPY – but to also broaden out to AUDJPY shorts – as a sustained period of equity market volatility and risk-off behavior could result in broad-based yen outperformance," CS concoludes.
'This content has been provided under specific arrangement with eFXnews'.
eFXnews is a financial news and information service. Articles and other information distributed in this service and published on this site are provided in general terms and do not take account of or address any individual user's position. To the extent that some of these articles include suggestions as to various possible investment strategies which users might consider, they do so in only general terms without reference to the personal factors which should determine any user's investment decisions to buy or sell a specific security or currency.
The service and the content of this site are provided and distributed on the basis of “AS IS” without warranties of any kind either, express or implied, including without limitations, warranties of title or implied warranties of merchantability or fitness for a particular purpose. eFXnews and its employees, officers, directors, agents, and licensors do not also warrant the accuracy, completeness or timeliness of the information in any of the articles and other information distributed in this service and included on this site, and eFXnews hereby disclaims any such express or implied warranties; and, you hereby acknowledge that use of the service and the content of this site is at you sole risk.
In no event shall eFXnews and its employees, officers, directors, agents, and licensors will be liable to you or any third party or anyone else for any decision made or action taken by you in your reliance on any strategy and/or advice included in any article and other information distributed in this service and published in this site.
Recommended Content
Editors’ Picks
EUR/USD consolidates weekly gains above 1.1150
EUR/USD moves up and down in a narrow channel slightly above 1.1150 on Friday. In the absence of high-tier macroeconomic data releases, comments from central bank officials and the risk mood could drive the pair's action heading into the weekend.
GBP/USD stabilizes near 1.3300, looks to post strong weekly gains
GBP/USD trades modestly higher on the day near 1.3300, supported by the upbeat UK Retail Sales data for August. The pair remains on track to end the week, which featured Fed and BoE policy decisions, with strong gains.
Gold extends rally to new record-high above $2,610
Gold (XAU/USD) preserves its bullish momentum and trades at a new all-time high above $2,610 on Friday. Heightened expectations that global central banks will follow the Fed in easing policy and slashing rates lift XAU/USD.
Week ahead – SNB to cut again, RBA to stand pat, PCE inflation also on tap
SNB is expected to ease for third time; might cut by 50bps. RBA to hold rates but could turn less hawkish as CPI falls. After inaugural Fed cut, attention turns to PCE inflation.
Bank of Japan set to keep rates on hold after July’s hike shocked markets
The Bank of Japan is expected to keep its short-term interest rate target between 0.15% and 0.25% on Friday, following the conclusion of its two-day monetary policy review. The decision is set to be announced during the early Asian session.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.