Forex trading and inflation : How to trade the yen

A report just released showed that inflation is out of control in the Japan.
This means that soon the bank of japan will have to start increasing interest rates.

This is bullish for the Yen.

An additional bullish element for the Yen is the buying of the Yen for investors and traders who have been using it for years to financial their long equity (stock) positions. The reason that they have to buy it is that they are selling their stock portfolios since we are in a bear market. Smart money mainly shorts stock in a bear market, and therefore they do not need the Yen to fund their stock market operations.

Therefore the trade is to buy the Yen.

Now against which currency?

It should be against the currency which is the weakest (in the future ) against the dollar. Two currencies come to mind: Euro, the Pound, the swissie, in addition to the canadian dollar and the aussie.

I would however give for the currency that has the lowest interest rate.

For that reason to trade the Yen, I am bearish on the following pairs:

1. EUR/JPY
2. CHF/JPY

Happy trading,

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