2020 Foreign Exchange forecast 7-14 Febr

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

USD Index	LT-M	MT-W	ST-D
98.70 (97.36)
Trend	↑ (↓)	↑ (↑)	↑ (↓)
% Risk Weight	55 (58)	65 (50)	92 (65)
Allocation	100% (100%)

Last week: The firm dollar past week is US equity demand and commodity trader supply related. The dollar index was strong and against our risk protection position which is aimed at Medium term and Long term transaction risk from dollar flows related to physical business, import/export, transactions. We stay firm on maintaining a full hedge on dollar receivables. Losing a few percent on this cost of goods sold position in the short term is weighed against the risk of losing much more if the dollar starts that longer term downtrend. No Change.

EUR/USD	LT-M	MT-W	ST-D
1.0942 (1.1088)
Trend	↓ (↑)	↓ (↓)	↓ (↓)
% Risk Weight	30 (28)	25 (35)	10 (20)
Allocation	100% (100%)

The US dollar is a little stronger again, and looking at technicals from experience, the risk of expecting a strong dollar is not good risk. All time frames are ‘dollar up’, yet the steep risk trend reversal in ST and MT and the mild risk trend reversal in LT Monthly are very suspicious indeed. We stay with our fully hedged dollar receivable advice. Same risk applies to MT or LT speculators as these pairs can pivot at a moments notice.

Last week: 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.

GBP/USD (Cable)	LT-M	MT-W	ST-D
1.2870 (1.3195)
Trend	↓ (↑)	↓ (↓)	↓ (↑)
% Risk Weight	74 (71)	40 (50)	12 (53)
Allocation	100% (100%)

Cable followed the general dollar trend up plus a bit more and lost nearly 2% last week. Horizontal support is coming in around 1.2750 and this level could signify a completion of the wave down that started at 1.3500 mid December. The same general analysis applies even though we believe GBP could be relative weaker in the major currency space. Even with all timeframes down, the overall technical picture calls for advice to stay with full long dollar receivcable cover in MT and LT. No Change.

Last week: 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

USD/JPY	LT-M	MT-W	ST-D
109.70 (108.30)
Trend	↑ (↑)	↓ (↓)	↑ (↓)
% Risk Weight	47 (43)	60 (65)	71 (17)
Allocation	70% (70%)

Dollar Yen followed the general dollar trend with a full one percent rally last week. Whilst price entrered the 109 range again this was a level to increase dollar receivable risk to 70% which logically happened on the firtst hourly bearish divergence confirmation at 109.60 on Febr 5. For now this looks to be the most responsible MT to LT risk weight hedge, possibly seeking to increase further if the dollar peaks at higher level of drops through support at 107.60 or subsequently the 105.00 support reached twice between Dec 2018 and Aug 2019.

Last week: 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

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GBP/EUR	LT-M	MT-W	ST-D
1.1755 (1.1875)
Trend	↓ (↑)	↓ (↓)	↓ (↑)
% Risk Weight	82 (84)	54 (57)	40 (74)
Allocation	100% (100%)

GBP’s relative expected weakness was confirmed with a 1% drop vs EURO. The 120-121 price window now seems stronger resistance and our advice to keep Sterling receivables or Euro payables fully covered remains the lowest risk play. No Change.

Last week: 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