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Top Trade Idea 2019: Short USD/JPY – Dovish Fed Looks to Weaken Dollar

Top Trade Idea 2019: Short USD/JPY – Dovish Fed Looks to Weaken Dollar

Peter Hanks, Strategist


The outlook for many currencies is opaque in the upcoming year. Trade wars and geopolitical risks are abound with new developments sure to arise. With the whirlwind of event and geopolitical risk, the Japanese Yen is one of the few currencies that I believe will remain consistent in the year ahead. While fresh threats can appear at any time, Japan has remained firm in both monetary policy and its avoidance of trade conflicts. Further, Prime Minister Shinzo Abe’s position in leadership appears unthreatened. Consequently, recent trends suggest the Japanese Yen is a strong choice for those looking to avoid drastic fundamental changes.

On the other hand, the US Dollar is the source for much of the world’s macroeconomic fundamental alterations. Near the end of 2018, a dovish shift from Federal Reserve officials unexpectedly called into question the case for three rate hikes in 2019 and any dovish deviation from the current path would weaken the Dollar’s position. It is on the back of this dovish shift I believe a USD/JPY short would present a profitable opportunity given the relative fixed status of one side and shifting fundamentals on the other.

To see all the of the analysts Top Trade Ideas for 2019 and Top Lessons from 2018, download the guides on the DailyFX Trading Guides Page.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.