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Your Trade for the Bank of Japan Meeting

Investors pass by an electric board showing the figure of Nikkei stock average in Tokyo, Japan.
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Investors pass by an electric board showing the figure of Nikkei stock average in Tokyo, Japan.

The Bank of Japan meets this Thursday, and more easy-money policy could lie ahead - but this strategist says betting against the yen is a mistake.

Several central banks are meeting this week, but Japan will also be releasing its semiannual economic forecast. "This is a biggie," says Rebecca Patterson, chief markets strategist for J.P. Morgan Asset Management, Institutional. "We think they're going to be revising both growth and inflation forecasts lower," she told CNBC's Scott Wapner.

All else being equal, you'd think that would hurt the yen, but you have to factor in overall risk sentiment in the market. "If we get this risk rally continuing, we're going to get a little bit of a weaker yen," Patterson says, and "you'll want to fade it.

"I think the yen, for better or worse, is going to stay strong."

Patterson recommends selling the British pound against the yen, since that pair closely tracks a key Japanese stock market index. If stocks fall and risk appetite fades, the yen will strengthen, she says.

Patterson wants to sell the pound against the yen at 123.25 with a stop at 125.00 and a target of 118.00.

You can watch the whole discussion on the videotape, starting at 8:51.

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Learn more: The essential vocabulary for currency trading is on Key Currency Terms. Top currency strategies are broken down for you in Currency Class.

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