Trade of the week from Mitsubishi UFJ
MUFJ recommends selling GBP/JPY for the week ahead at current levels near 131.00 with a stop at 134.10 and a target near the March low at 126.60.
"We still have a bias favouring yen strength and looking at currencies to seek GBP against we see JPY as a good option. The JPY has under-performed in recent weeks so the move weaker in GBP/JPY has been les than GBP weakness versus other currencies. Furthermore, speculation on negative rates in the UK could spark selling in in the Japan retail market where market paricpants have built substantial long positions," MUFJ said.
"We are conscious that short GBP is already a popular trade and this is the risk in this trade -- that we are entering a crowded position. However negative rates in teh UK would be a very different prospect for GBP when compared to negative rates for EUR, JPY, CHF and SEK. A far greater negative hit for GBP is likely," MUFJ said.
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