GBP to be the main focus on Monday morning

Cable fell by about 90 pips in thin late-NY trade after Moody’s downgraded the UK by 1 notch. This move was overwhelmingly expected but many players will not or cannot act until after the event. Asset managers and much of the real-money brigade may now be forced to chase this move lower. This is how I would play it on Monday in Asia, when it will be volatile:

• I think its best to stick with the sell-rally strategy in the GBP.
• The AUD may also struggle as risk sentiment suffers.
• I prefer to sell rallies in USD/JPY as GBP/JPY selling should be a major factor from real money accounts.
• I prefer to buy big dips in EUR/USD (somewhat dependent on Italian election of course), as real money will also be buying EUR/GBP.