AUD/JPY – The Boat We Missed

We published a thesis yesterday for being short Australian dollars “AUD” and Long Swiss Franc “CHF”. In conclusion, we wrote: While we started drilling down on this idea because of our bearish view on AUD, in conclusion we have to admit that we like this trade more because of the CHF component.

Despite our gargantuan temptation to want to focus on CHF, we did our best to resist it and focused instead on the bearish AUD idea chain. We will be sure to publish our report on a long CHF idea in the coming days. This article, however, is a continuation of the short AUD idea chain. Our focus here is the Japanese yen “JPY” , another safe haven currency.

For those of you who haven’t followed along, please check out our previous posts for a quick primer on this idea chain:

  1. The Aussie Dollar, In A Checkmate!
  2. Australian Dollar – A Bearish Outlook But A Bullish Set-Up
  3. Rigel’s Currency Corner – Short AUD/CHF

Our Thesis

Most of what we laid out yesterday applies to the AUD/JPY pair as well. Salient points below:

  1. Protection is cheap:
  2. In times of crises, during a risk-off mode, the US dollar, the Japanese Yen, and the Swiss Franc are seen as currency safe-havens.
  3. The Bank of Japan’s (BOJ) balance sheet size to GDP ratio is at 90%, currency intervention from the BOJ is a low risk.
  4. China devaluation risks have disappeared only from the minds of traders.

Please click here to read the entire article.

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