The chances of a direct conflict between the US and North Korea are escalating. The US Navy is reportedly following a North Korean ship through international waters. Under recent UN sanctions, the US could request to board and search the vessel. North Korea would certainly not allow this to happen. Also, North Korea has promised to test a ICBM this weekend and send it over Japan into the Pacific. Supposedly the missile has the capabilities to reach Hawaii.
Either of these two events would cause enormous uncertainty in the global markets. For those clients who believe that the likelihood of either of these events happening is high, we suggest a short EUR/CHF position. normally in times of global crisis, the USD is the best safe-haven currency, followed by CHF. A short EUR/CHF position combines these two ideas since one cannot be directly long USD and long CHF in one pair.
Short EUR/CHF combines a short EUR/USD position (which has long USD as it’s denominator) with a short USD/CHF position (which is long CHF as it’s denominator). So while a short EUR/CHF position has no direct USD involved, the position is a combination of the two high probability safe-haven positions.
Stay Nimble!
Stephen Leahy
Back Bay FX Services, LLC
www.backbayfx.com
