FX FUNDAMENTAL ANALYSIS by Naeem Aslam
SAFE HAVEN TRADES
Amidst growing geopolitical tensions investors focus has shifted towards Yen, Bitcoin, Gold and Swiss Franc
In times of uncertainty, the smart money is always keen to look at opportunities which could protect its downside risk. It is natural for all market participants to find it difficult to predict all market moves, so playing safe is the ultimate goal during the uncertain time. Te term “hedge your risk” was coined pretty much based on this idea. Te current bull market traces its beginning back to the financial crisis and we are yet to see the much anticipated pullback.
However, when the markets start to show some cracks, the smart money not only reads the cracks in the bull market
34 FX TRADER MAGAZINE October - December 2017
well before anyone else, but also takes steps to protect their downside risk. In other words, when you see the ingredients of a recipe on the chef ’s table, you know that he is going to cook that recipe. What you do is prepare yourself to have his food. And that is where your safe haven trade comes into the play.
Your typical safe haven trades are different in different markets. For instance, in the currency market, the Japanese Yen and the Swiss Franc are considered as safe haven trades. More recently, investors have also started to
consider the Euro as a safe haven trade. Who thought that the Euro could also be a safe haven currency when the existence of the currency was under a massive question some years ago? In fact, it is only aſter the French election which has restored investor’s confidence in the currency.
Te yellow metal is the well-known
derivative which is known amid traders when the risk-off trade sweeps the floor. During the peak of the financial crisis, we have seen how investors pushed the price of the shining metal all the way marching close to $2000.
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