2020 Foreign Exchange forecast 27 March
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 | |||
---|---|---|---|---|---|---|
99.44 (102.47) | ||||||
Trend | ↑ (↑) | ↑ (↑) | ↓ (↓) | |||
% Risk Weight |
54 (62) | 55 (65) | 55 (98) | |||
Allocation | 50% (100%) |
23 March: In spite of the extremely volatile move in favor of the dollar this past week the Greenback looks still very vulnerable. In fact it looks like a paper market driven event that is as rediculous as paper Gold and Silver being shot in the foot. This dollar level simply cannot hold both technically and fundamentally, the latter becoming more relevant signalling much caution due to the unprecedented monetary support. Given the very strong potential of bearish divergence confirmation in the LT Monthly and MT Weekly time frames any US dollar receivables must be fully covered. There is one caviat that companies will need to consider without remorse; Uncover that part of a hedge that is not required due to a lower expected exposure. For some very large companies this may be a treasury issue and we would be totally happy to wait for the index to drop at least 5% before making that move. No Change.
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 | |||
---|---|---|---|---|---|---|
1.1000 (1.0745) | ||||||
Trend | ↑ (↓) | ↓ (↓) | ↑ (↓) | |||
% Risk Weight |
35 (28) | 38 (30) | 35 (7) | |||
Allocation | 50% (100%) |
March 23: The moves we have seen this past week into today is not even close to the kind of volatility seen in the 70’s and 80’s. Yet this is a whipsaw market for speculative traders. Important is the technical picture in the MT Weekly timeframe showing a bearish divergence 3 weeks ago and now building a bullish divergence. Also the LT Monthly time frame is building bullish divergence coming from the the Oct 2019 low that we considered to be the real market reaction bottom for Euro’s. The January 2017 bottom at 103.40 has held and we would expect this to hold given the risk weight position of all time frames. Remain fully hedged and just take out an overexposed cover due to transaction volume adjustment at some point in the future first waiting for the Euro to strengthen first. This is a low risk position in our view. 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 | |||
---|---|---|---|---|---|---|
1.2250 (1.1600) | ||||||
Trend | ↓ (↓) | ↑ (↓) | ↑ (↓) | |||
% Risk Weight |
65 (55) | 17 (8) | 35 (7) | |||
Allocation | 50% (100%) |
23 March: In last week’s turmoil we did not update the above risk weight figures for March 13 which is now adjusted. Last week’s comment below was as intended fo March 13.
This week is no different. Cable still looks to develop bullish divergence and is likely to follow the overall dollar trend which we expect to be down. The 11% drop since the March 09 high may have (nearly) run its course. Except for lightning up the position to allow for lower transaction volume long dollar receivables should remain fully covered. The risk against cost of goods sold and bottom line is typically manageable. Arguably the call for Cable has been early looking at the extreme move during the past three weeks. The high risk US dollar technical picture does not change. This is a corporate risk approach not a short term speculative risk approach. No Change.
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 | |||
---|---|---|---|---|---|---|
108.80 (111.20) | ||||||
Trend | ↑ (↑) | ↑ (↑) | ↓ (↑) | |||
% Risk Weight |
48 (53) | 57 (65) | 82 (93) | |||
Allocation | 50% (100%) |
23 March: Dollar Yen gives no different risk weight picture than other major currencies and probably looks a little weaker technically. If Japan reovers more quickly from the Corona pandemic, which it now may do, the Yen could develop a stronger price against most other major currencies. No Change
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 | |||
---|---|---|---|---|---|---|
1.0720 (1.0720) | ||||||
Trend | ↓ (↓) | ↑ (↑) | ↑ (↑) | |||
% Risk Weight |
70 (65) | 17 (12) | 45 (20) | |||
Allocation | 50% (50%) |
23 March: GBP risk weight remains low and having taken 50% of the position off the table following a strong decline last week we feel comfortable with a 50% hold. No Change.
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