2020 Foreign Exchange forecast 31 Jan – 7 Febr

covering USD Index, EUR/USD, GBP/USD, USD/JPY, GBP/EUR

USD Index	LT-M	MT-W	ST-D
97.36 (97.88)
Trend	↓ (↓)	↑ (↑)	↓ (↑)
% Risk Weight	58 (60)	50 (43)	65 (88)
Allocation	100% (100%)

The USD index traded a little higher in the early part of the past week before sinking 0.5% on simple month-end trader book squaring it seems. We continue to strongly favor a position that protects against further Dollar weakness. No Change.

Last week: We stay with the Monthly Long term risk weight trend which is down. We cannot exclude another 1% advance and the dollar looks like it could stay in this price range for a while longer. Full dollar long exposure should remain covered until the LT trend changes in line with ST confirmation. No Change

EUR/USD	LT-M	MT-W	ST-D
1.1088 (1.1020)
Trend	↑ (↑)	↓ (↓)	↓ (↑)
% Risk Weight	28 (27)	35 (45)	20 (24)
Allocation	100% (100%)

The Greenback held support at the 1.10 handle and rallied 0.7% on Jan 31 to close at 1.1088. Specs should not be long dollars. Transaction risk on dollar receivables to be covered fully. No Change.

Last week: Main driver of trend is Monthly risk weight which is still in an uptrend albeit a slowing down uptrend. Weekly is down and Daily at a low risk weight level of 10. This could mean dollar strength for a few more weeks but the LT uptrend is still a real and too significant risk of dollar weakness ahead. No change

GBP/USD (Cable)	LT-M	MT-W	ST-D
1.3195 (1.3065)
Trend	↑ (↑)	↓ (↓)	↑ (↓)
% Risk Weight	71 (70)	50 (55)	53 (55)
Allocation	100% (100%)

Sterling still shows similar potential strength vs USD as the other major currencies. In terms of price outlook and once the Dec high is taken out we could be targeting the 1.4000 handle that we saw in the early months of 2018. No Change.

Last week: Cable needs to confirm strength in coming days and maybe weeks in order for us to maintain a strong outlook for Sterling vs USD. No change for now as the LT trend still looks to remains firm

USD/JPY	LT-M	MT-W	ST-D
108.30 (109.25)
Trend	↑ (↑)	↓ (↑)	↓ (↓)
% Risk Weight	43 (45)	65 (79)	17 (75)
Allocation	70% (50%)

Past week’s price action in Dollar Yen starts to look like a runaway market from recent dollar highs. Any rally is likely to be weak. We propose lifting the long dollar exposure risk hedge to 70% on the 109.00 price point or a break of 107.50 whichever comes earlier.

Last week: Dollar was weak during the recent review period but not enough to warrant an increase in cover. We stay at 50% cover on long dollar transaction risk. Very short term we could see a small rally of $/Yen towards the upper 109 handle. No Change

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GBP/EUR	LT-M	MT-W	ST-D
1.1875 (1.1855)
Trend	↑ (↑)	↓ (↓)	↑ (↑)
% Risk Weight	84 (83)	57 (58)	74 (82)
Allocation	100% (100%)

GBP continues to develop a weaker picture technically just like we identified in December. GBP long risk exposure should remain covered 100% with further out forward dates. No Change.

Last week: The current uptrend in this cross looks very much like a normal and soon finishing price reverse reaction to the downtrend that started in December at 1.2100. We see GBP eroding over a long periof of time once the LT Monthly trend turns down from the present 80+ risk level. No Change to remain fully hedged against GBP receivables.