Positioning for short Nikkei, things to get worse before they get better

Strategic Trade / Sell

Kay Van-Petersen

Global Macro Strategist, Saxo Bank Group
Kay Van-Petersen joined Saxo in 2014 as a Global Macro Strategist, based in Singapore. He focuses on delivering strategies and analyses across asset classes based on monetary & fiscal policies, global geopolitical landscapes as well as other macroeconomic fundamentals. He also takes into account market sentiment, technical and momentum factors.

Instrument: NK225c1
Price Target: Index level 21,660
Market Price: Index level 21,730

Background:

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. 

Management And Risk Description:

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.

Trading Plan

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.

Parameters:

Entry: 21,730
Stop:  –
Target: 21,660
Time Horizon:  Strategic

   

-- Edited by

Clare MacCarthy

Nikkei index.                                                                                                                                           Source: Saxo Bank

Nikkei and JPY 5-year.                                                                                                                          Source: Saxo Bank

Access both platforms from your single Saxo account.

A compiled overview of Trade Views provided on Home.saxo can be found here (https://www.home.saxo/en-gb/insights/news-and-research/trade-views/report).

Disclaimer

Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice or a personal recommendation and does not take into consideration your objectives, financial situation and needs. Saxo Capital Markets UK Limited will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information. We assume no liability for errors, inaccuracies or omissions contained within these materials.

It is important that you understand that with investments, your capital is at risk. We offer leveraged products which carry risk and can result in losses that exceed deposits. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more here.

Additional Key Information Documents are available in our trading platform.

Saxo Capital Markets UK is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871

Please read our full disclaimer - https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer