The Trader View Ahead for Pound, Yen, Euro, Dollar
The yen plays a safe-haven role when risk rises. So, if risk flows into the market we would expect the yen to act relatively strong compared to the rest of the currency pack, asserts Jack Crooks of Black Swan Capital.
“Good tests kill flawed theories; we remain alive to guess again.”
GBP/JPY the risk trade?
The chart below shows cross-rate for the British pound/Japanese yen (GBP/JPY).
Short this pair is our favorite trade should we finally get some risk (aka risk-off) flowing into this market (global stock sell-off).
And in the chart below you can see how GBP/JPY has moved relative to S&P 500 stock and Nikkei 225 stock index.
The yen plays a safe-haven role when risk rises.
So, if risk flows into the market we would expect the yen to act relatively strong compared to the rest of the currency pack.
And if risk rises, the UK economy looks vulnerable. And increasing concern about the UK economy, in this still low inflation world would suggest traders might further push out any BOE rate hike expectations; likely weakening the pound.
We’ve been getting burned in our efforts to short euro/U.S. dollar (EUR/USD) lately.
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