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10 Feb 2016
Stay short GBP/JPY as Japanese nightmare continues - SocGen
Kit Juckes, Research Analyst at Societe Generale, notes that another bad night for the Nikkei, another good day for the yen, though 10-year JGB yields have popped back above zero.
Key Quotes
“USD/JPY will probably trend sideways this year with occasional brutal forays lower, rather than trend back to fair value (105-110). The BoJ won’t give up on its cheap yen policy until it works, so we’ll want to switch the long leg of our short GBP/JPY trade one day – just not quite yet.
In a nutshell, in real the pound is as expensive today as it was at its peak in 2007, and a good bit more expensive than it was in 1998. Not cheap enough yet, at least not while there is the Sword of Brexit hanging over it, and while rates are on permahold. Stay short GBP/JPY, target 150, stop on a break back through 176.”
Key Quotes
“USD/JPY will probably trend sideways this year with occasional brutal forays lower, rather than trend back to fair value (105-110). The BoJ won’t give up on its cheap yen policy until it works, so we’ll want to switch the long leg of our short GBP/JPY trade one day – just not quite yet.
In a nutshell, in real the pound is as expensive today as it was at its peak in 2007, and a good bit more expensive than it was in 1998. Not cheap enough yet, at least not while there is the Sword of Brexit hanging over it, and while rates are on permahold. Stay short GBP/JPY, target 150, stop on a break back through 176.”