Risk Aversion Combined with a Dollar Pullback
This is my favorite trade from a fundamental perspective at the moment and is the best way to position oneself following the FOMC interest rate decision. Due to my bearish sentiment on US equities, the flight to safehavens like the yen is a theme I am very confident will play out.
Interest rate maintenance for the US dollar now clears the way for the yen to strengthen in the inevitable flight to safety. I was a bit conflicted before with the specter of a rate hike which would strengthen the US dollar vs the yen. Now that is confirmed to be a non-factor, we will likely see at least a retrace to the recent low we hit not long ago. Moreover, the SP500 was quite bearish despite the bullish scenario of 0 interest rates and possible QE4 in the future. This could indicate a serious change in market attitude toward this ongoing central bank regime of zero to negative interest rates.
Of course, how equities perform tomorrow will be important to confirm this, but as of now I already have some aggressive positions in the USDJPY and may add more shorts depending on upcoming price action.
Interest rate maintenance for the US dollar now clears the way for the yen to strengthen in the inevitable flight to safety. I was a bit conflicted before with the specter of a rate hike which would strengthen the US dollar vs the yen. Now that is confirmed to be a non-factor, we will likely see at least a retrace to the recent low we hit not long ago. Moreover, the SP500 was quite bearish despite the bullish scenario of 0 interest rates and possible QE4 in the future. This could indicate a serious change in market attitude toward this ongoing central bank regime of zero to negative interest rates.
Of course, how equities perform tomorrow will be important to confirm this, but as of now I already have some aggressive positions in the USDJPY and may add more shorts depending on upcoming price action.
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