These are just my opinions and I’m sure there are plenty with exactly the opposite view
- EUR/USD: I think being long is the much safer play. Anyone with long USD positions will be very nervous and if we see big movements from Sovereign players then they are likely to stick with their recent form and buy EUR/USD
- USD/JPY: Short here is the obvious play; risk-off and USD-negative gives this pair the double-whammy. Don’t forget the recent futures data which showed JPY futures approaching record longs so the market is already hedged here to some degree
- USD/CHF: Same as USD/JPY
- AUD/USD (Plus NZD/USD and USD/CAD): Any default or downgrade would also be accompanied by large scale US spending cuts. This is very bad for US growth, and bad for the world economy. Risk trades might get smashed so I favour a ‘sell rally’ strategy here
- Cable: Likely to follow EUR/USD in the main but also likely to underperform (ie EUR/GBP higher I’m thinking)
That’s my view of the world, for now at least.
