New British Prime, Yen vs.Gold

24 thg 7, 2019

Boris Johnson became UK prime minister after the decisive Tory vote. He beat Jeremy Hunt comfortably, winning 92,153 votes to his rival's 46,656. What does this mean for a pound? The entrance to the turbulence zone. The Brexit negotiations, which were essentially frozen for several months, will again enter the active phase. Johnson is known for his attitude to Brexit: exit from the EU. What does this mean for a pound? A strong decline due to no-deal Brexit.

What is the likelihood of this scenario? In our opinion, extremely low. The British Parliament has already made it clear that Johnson simply will not gain votes for this. Which leads us to the logical conclusion - would not be accepted a no-deal withdrawal. This means that the current price of a pound is a great opportunity for its cheaper purchases.

Is there any chance that the pound will decline more? Definitely yes. Possible decline in pound price is recommended to be used as a possibility to increase the size of the longs in it.

Meanwhile, Analysts at Goldman Sachs analyzed options for investing in haven assets and concluded that the Japanese yen is a good option. Motivation - gold is too volatile. This significantly increases the risks of such investment, when the yen looks less risky. Another argument in favour of yen. This year, gold has already increased by 11%, and the Japanese yen - only by 1.6%. That is, from a position of overvalued/undervalued yen looks undervalued against the overvalued gold. Well, the final argument in favour of yen purchases - in case of interventions from the US, the USDJPY price will decline sharply. Recall, we have been recommending selling USDJPY for a long time.

As for our other trading recommendations for today, they are unchanged. We will continue to look for opportunities for selling the dollar across the entire spectrum of the foreign exchange market, buying the pound against the dollar as well as against the euro, selling oil and the Russian ruble, and also buying the Japanese yen against the dollar. As for gold, considering how high it climbed, for the time being, we will trade it with no clear preference, buying from oversold zones and selling in overbought zones.