AN INTERESTING ONE - The Yen is one of the most interesting currencies out there and will be a good one to keep an eye on in the weeks and months ahead. The thing about the Yen, as many of you know full well, is that it isn't a safe haven currency, rather a funding currency that benefits from flight to safety as risk assets (that had been funded with the Yen) are liquidated back into the Yen. And so, at some point during an extended downturn in markets (lasting longer than a minute..ie weeks and months) , there should be another phase in which all of that money that liquidated back into the Yen then rotates from the Yen into a currency that actually is a safe haven currency. But for now, any pullback in risk and downturn in the global equities market, will indeed benefit the Yen and drive the price of USDJPY lower. And what this means from a strategic perspective is that any rallies in USDJPY should be viewed as a compelling opportunity to sell. The other interesting thing about this play is the fact that the market has been very down on the US Dollar, which also should translate into demand for the Yen. And so, I love the idea of selling USDJPY into rallies and we'll see if that opportunity presents.
CORRELATION - As far as the Dollar bearishness goes, I'm already positioned that way through the Pound. We've spent a lot of time going through all of the technicals and fundamentals behind the Cable long so I will spare the details and let you look back through the analysis over the past several days. But the thing about it is that I will be happy to take a position short USDJPY as well, given the lower correlation between the Pound and Yen. Going forward, I do think we could see a scenario where both correlate with one another relative to the Dollar, but on completely different themes. I think we could see the Pound bid back on a better outlook in the UK that puts the BOE in position to be thinking more hawkish and I think the Pound stands to benefit from renewed broad based Dollar weakness. The Yen on the other hand, should rally on the anticipated wave of risk off more than anything else, though as per above, could also benefit from the Dollar selling. So let's see. Right now, it's just the GBPUSD position until USDJPY gives me what I want.