Foreign Exchange forecast 19 June 2020
covering USD Index, EUR/USD, GBP/USD, USD/JPY, GBP/EUR
USdollar Index Weekly Dollar Index Price Risk Analysis Forecast
(Previous week in brackets)
USD Index | LT-M | MT-W | ST-D | |||
---|---|---|---|---|---|---|
97.66 (96.95) | ||||||
Trend | ↓ (↓) | ↓ (↓) | ↑ (↑) | |||
% Risk Weight |
40 (40) | 28 (45) | 60 (6) | |||
Allocation | 50% (50%) |
27 May: The index lost 1.5%, which was minimized by the weakness of the Yen but it shows a trend that is still in force. Given the size of the relatively determined direction down since 3 weeks, we should see some bullish divergence in the daily risk weight before a bear market rally or reversal is expected. We would say another 2% in to the high 94 handle is quite likely over the next few weeks. No Change in exposure management risk policy in keeping 50% long dollar exposure covered.
EUR/USD FX live price, Weekly EURO vs US Dollar Price Risk Analysis Forecast
(Previous week in brackets)
EUR/USD | LT-M | MT-W | ST-D | |||
---|---|---|---|---|---|---|
1.1165 (1.1278) | ||||||
Trend | ↑ (↑) | ↑ (↑) | ↓ (↓) | |||
% Risk Weight |
45 (50) | 54 (43) | 40 (91) | |||
Allocation | 50% (50%) |
27 May: Most market analysts are mistified. What’s the future of the petrodollar? Will Europe manage to hold it together? Isn’t the real pandemic an economic one, with debt having spread everywhere and rising rapidly? As the Euro has gained 2%, or rather the dollar has lost 2%, more or less, across international trading boards, the technical scenario today is bullish for EUR. Especially the Longer term time frames look firm again for the Euro, but with trade liquidity still lacking pace it will be hard to predict a level in three or 6 months time. Right now the Euro looks to build momentum for a move towards the peak resistance line at around 1.1850. We hold our continued 50% receivables cover on long dollar risk. If the dollar makes a final break, up or down, the market will adjust itself as it always has, via trade negotiation and or protectionist measures. No Change
Cable GBP/USD FX live price, Weekly Sterling vs USDollar Price Risk Analysis Forecast
(Previous week in brackets)
GBP/USD (Cable) | LT-M | MT-W | ST-D | |||
---|---|---|---|---|---|---|
1.2320 (1.2640) | ||||||
Trend | ↓ (↑) | ↑ (↑) | ↓ (↓) | |||
% Risk Weight |
48 (52) | 62 (50) | 35 (92) | |||
Allocation | 50% (50%) |
27 May: GBP was also stronger in spite of or even thanks to Brexit worries. Covid has hit the UK harder in Europe than all other countries of size except Belgium. The same dollar strategy applies. It is just right to have about 50% long dollar risk cover for the time being
USD/JPY FX live price, Weekly USdollar vs Japanese Yen Price Risk Analysis Forecast
strong>(Previous week in brackets)
USD/JPY | LT-M | MT-W | ST-D | |||
---|---|---|---|---|---|---|
106.75 (109.45) | ||||||
Trend | ↑ (↑) | ↓ (↑) | ↓ (↑) | |||
% Risk Weight |
54 (56) | 56 (62) | 12 (92) | |||
Allocation | 25% (50%) |
27 May: Dollar Yen, as mentioned last week did the opposite again and rallied 1.5% against the general dollar downtrend. The reason can be found in further monetary accommodation on an already stretched 250% debt to GDP ratio. All risk weight trends are up and Japan would not mind seeing a weaker Yen to stimulate exports and compete with the Chinese. Because of the technical behavior and fundamental uncertainty we would favor letting the 50% long dollar cover being absorbed by the actual spot movements and run down this position for the next three months to around 20-25%. The forecast trend therefore is one of a developing weaker yen in international fx markets
GBP/EUR FX live price, Weekly Sterling vs EURO Price Risk Analysis Forecast
(Previous week in brackets)
GBP/EUR | LT-M | MT-W | ST-D | |||
---|---|---|---|---|---|---|
1.1045 (1.1213) | ||||||
Trend | ↓ (↓) | ↑ (↑) | ↓ (↓) | |||
% Risk Weight |
45 (48) | 55 (45) | 30 (53) | |||
Allocation | 80% (80%) |
27 May: A 40 year down trend was temporarily paused for 3 years and looking at that 40 year trend we expect another 20 cent drop of GBP vs Euro over the next 3 or 3 years. The technicals are not strongly pointing in that direction but they certainly do not oppose this (strong) possibility. Quite funny looking back at the 1992 devaluation of GBP, more or less at the end of a primary Sterling down move. The term ‘whatever it takes’ wasn’t invented yet and the BoE could be and was broken by pure market speculators like Soros Quantum fund. GBP’s move in March 2020 wasn’t much smaller than the devaluation move in September 1992. Maybe it’s in the air, but something says a wave of interest rate moves may be in the making. ‘Whatever it takes’ can only lasts as long as the strongest House of Cards and in every House of Cards there is a unforeseen element of weakness. No Change
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