Strategic Trade / Sell
Price Target: Index level 21,660
Market Price: Index level 21,730
Trade tariffs and trade wars are just shifting into higher gear. The combination of potential auto tariffs, a stronger yen and risk-off could set the scene for a triple hit for the Nikkei, which is also struggling technically (it has broken through its 200-day moving average and is failing to hold above 22,000).
I think its only a question of time before we see the next round of tariffs from the US, and potentially more announcement this Friday or over the weekend.
Position is 1x capital, so for the Macro Monday book that is circa $10m.
The potential key risk here is that trade disputes get solved sooner rather than later, leading to a relief rally in the Nikkei. A weaker yen could also complicate manners as that tends to be supportive for the Nikkei.
For now its putting out a line on the short side on the Nikkei, looking to potentially add to the short at the 22,000 level – if we get there. And then to add a long S&P futures leg, so this is very much building out from a portfolio composition of the Macro Monday trading book.
Time Horizon: Strategic