FFCA MARKET COMMENT
APRIL, 2016
COMMENTARY ON RECENT FOREX MARKETS’ BEHAVIOUR
Big Picture Comments
Latest economic data releases and statements by policymakers generally confirm the big
picture which we have been painting for many months now. That being the case the stage is
set for our forex market trends to become more definite and more reliable for guiding
transactions. Accordingly, there are major opportunities to use these trends to guide your
foreign exchange transactions.
Global economic conditions are such that a return to ‘business as usual’ or ‘normal’, post the
Global Financial Crisis (GFC), remains elusive and could still take 3 to 5 years – that is, 11 to
13 years since the onset of the crisis in 2008. That makes forex markets dangerous and
skittish – that is, above ‘normal’ danger and volatility.
The background to our comments on issues this month may be summarized in 5 statements:
1. There is general impatience in the world about low economic growth rather than
impatience about an imminent inflation threat;
2. It is now 8 years into the global financial crisis (GFC) and there are still concerns
about money markets. Money is a low return, low volatility asset but if the markets
are inefficient then your money may not be as safe as you think. When we hear the
word ‘normalisation’ we think that it refers to the time when full confidence in the
money markets has returned.
3. The FFCA view is that the world is still suffering from the after effects of the GFC
and along with several new factors causing generally sluggish but positive economic
growth.
4. Due to 3. above we do not expect concerns about inflation to dominate market
sentiment over the 12 month horizon. Some countries may hope that global
conditions will allow their country to make monetary conditions less
‘accommodating’, and at the same time signal that the money markets are healthy
enough to move towards interest rate signaling. These are complicated issues but our
analysis suggests that our views are being vindicated on a continuing weekly basis.
5. Central banks are of course correct to worry about inflation threats. But with greater
openness in world trade (unparalleled), yet at the same time with punitive resort to
economic sanctions (not so open), the achievement of inflation will be much more
difficult than before.
The Euro Area
Problems in the Euro area are still being swept under the carpet rather than properly
vacuumed. To some extent the major players are following a line of benign neglect. In a
world of sluggish growth any major developed country would prefer a weaker to stronger
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The FFCA Report – FFCA Market Comment, April 2016
exchange rate. Germany’s unemployment rate (4.3%) is less than half of those of
France and Italy, and the German economy may soon become open to its own fresh
inflationary threat, at least as strong as the case in the USA (5.0%) and the UK (5.1%).
But as stressed in earlier FFCA reports, the Euro area as a whole cannot raise interest rates.
The commitment to a single currency, the Euro, commits all members to the same exchange
rates relative to non-Euro currencies. Therefore, while a rise in German interest rates might
be warranted on the basis of threats to German inflation, any such increase would translate
to similar increases in other member countries – many of whom have higher unemployment
rates (in some cases 5 times the German rate).
In short, the Euro area is in an ongoing dilemma which pitches the problems of some
countries against the problems of other member countries. Greece is/was the most obvious
example of a more general malaise within the Euro area system. That being so it is difficult
to be confident that the Euro will survive the next 5 years as new and old challenges return
to plague the policymakers and disturb the mechanics of holding a single currency together.
Many Euro area member countries are implementing reforms, both micro and macro, in an
attempt to contribute to a stronger system. The problem for investors is to judge the timing
of the pace of improvements in policies against the timing of political frustrations and
impatience of country member electorates. And a broader background of sluggish world
economic growth only serves to emphasise the differences between ‘successful’ and
‘unsuccessful’ countries within the system.
No-one knows the endgame for the Euro area (single currency), nor the timing. The UK is
struggling to garner support even for staying in the European union (politico-economic
union) which underlines the potential weakness for the Euro single currency. Member
countries are implementing their own reform policies at differing speeds and with varying
degrees of conviction. Immigration and Syrian refugee inflows are adding to the problems of
maintaining strong commitments to common goals.
Progress is certainly occurring but the challenges to success remain strong as well.
USA Monetary Policy Stance
Intelligent discussion of this issue is currently confused by the lack of precise meaning of
one word – ‘normalisation’. Many commentators seem to believe, incorrectly in our view,
that the word means raising short term interest rates to a more normal level. Our view is that
‘normalisation’ refers to the central bank’s use of short term interest rates as the principal
tool for implementing monetary policy – it presupposes that money markets exist and are
efficient. Under ‘normal’ circumstances ‘money’ exhibits low volatility (risk) and low return.
But when the financial system is weakened (e.g. post GFC) investors cannot be fully
confident that money has those attributes.
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Many reforms have been put into place in the USA and around the world to improve the
efficiency of the financial system and to move back towards a more ‘normal’ set of monetary
policy instruments. The central banks themselves say that work remains to be done before it
can be said with confidence that banking systems can now work well enough to serve the
public need for money markets, including their use to signal policy changes.
A third and final point is that central banks are still required to judge whether monetary
conditions are appropriate, or whether to tighten or to loosen them. This is an issue
independent of the actual policy tools.
The US Fed has been keen to avoid fresh inflationary pressure, as the unemployment rate
has declined to a rate which may push wage rates higher than productivity growth. But
outside of the US the world economy is displaying deflationary rather than inflationary
pressure. And the world economy is now much more open suggesting that price pressures
will tend to equalize around the world.
We expect that the Fed will continue to rattle the chains but also recognize the strength of
deflationary forces around the world. We expect the USD to receive little support from
higher short term interest rates this year. It is an election year and the central bank is neutral.
The case for raising interest rates has become weaker since December and the Fed would
not simultaneously raise rates further as the economy weakens, especially in an election year.
China
We stick by our judgments in a lengthy report about 18 months ago written in China. That
country is going through the classical stages of economic growth at a rapid pace, and for a
country of this scale, in number of people and resources, there are major implications for the
region, for the global economy, and, of course, for China internally. These sets also intersect.
Using W. W. Rostow’s descriptions below, China is, in general, transitioning from “Takeoff” to “Drive to Maturity”.
a) Traditional society
b) Pre-conditions for take-off
c) Take-off
d) Drive to Maturity
e) High Mass Consumption
The transitions are multifaceted and poorly understood by the mass media which insists on
focusing on the slower growth rate in the economy than the underlying reasons which are
broadly very positive. If you imagine USA in 1890 trying to get to the USA in 1990 then that
gives an idea of the nature of the changes involved. ‘China slowdown’ has much more
attention-grabbing potential than ‘multifaceted transition’. That’s the world we inhabit. The
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‘slowdown’ idea also has the associated idea of blaming foreigners and communists, rather
than observing the roles of developed economies in producing sluggish global growth.
Our major conclusion a year ago was that China is making progress across a wide range of
systems which are essential for it to pursue a ‘drive to maturity’ phase of growth for the next
20 to 30 years. In essence, it involves a switch to the quality of economic development which
may in the end accelerate China’s real growth for a time back towards 10%pa.
The original report was included in our October 2014 Report and I warmly recommend it as
an introduction to current transitions within China. Its about 20 pages long.
Commodity Prices
Commodity currencies have been battered and bruised during 2015, and now into 2016, and
we have been on the wrong side of the ledger on that issue for two reasons. First, there is no
uniformity – there is no global recession. Rather the sources of depressed prices have been
microeconomic and not macroeconomic. Oil, industrial commodity prices, and some soft
commodities such as dairy prices have been hammered. In certain cases the drivers of these
changes in prices have been through private and public sector initiatives and/or mistakes
which have given rise to unexpectedly high growth in supply. The issue has not been
demand driven.
In other cases the issue has been mainly one of geopolitics. Imposing sanctions is a crude
tool at the best of times and often harms innocent people and countries indirectly. Counter
sanctions exacerbate the issue even further. Clearly free trade is a source of potential
economic growth which explains the wholehearted support for the World Trade
Organisation by vast majority of nations.
Sanctions disrupt free trade and the strategic plans of corporations and countries. Sanctions
are a source of instability and therefore a source of potential weakness in global growth. Of
most importance this year has been the effect of the stand-off on the war in Ukraine, and
latterly the potential lifting of sanctions against Iran underscores the potential instability of
the oil markets.
Closing Remarks
You might respond that forex markets are often exposed to the type of developments listed
above. You would be correct. And there is no shortage of episodes, taken in isolation, which
could be used to support your case.
Our view is that the scale and power of potential sources of instability has in recent
times been very high and for some time we have been sidelined by the degree of potential
volatility in markets.
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But in maintaining a dialogue with the markets, that is following closely their reactions to the
evolving evidence, we can build up our confidence in the future trend direction of currencies.
Many market participants have no alternative but to engage in transactions even if they feel
uncomfortable doing so. Global commerce is in an expansion phase, and associated financial
flows of speculative capital and investment capital rely on some view of the trends in forex
markets.
The intention of the FFCA business is to maintain a dialogue with the markets in these
reports and by questioning our own judgments and the markets to build up greater
confidence in guiding forex decisions.
The process is continual, but patient, persistent and of high integrity.
Charts in this report are sourced using the OANDA platform:
www.oanda.com. Thank you.
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The FFCA Report – FFCA Market Comment, April 2016
AUD/CAD
1
April 2016 View:
•
•
•
•
•
Longer term Uptrend is suspect but, we believe, intact
FFCA view – upward trend to re-establish with weak conviction
Canada has yet to implement major reforms in its taxation system and therefore lags
behind Australia on Factor#2
In other respects the relative scores are fairly even leaving the gap in scores in a
'weak conviction' range
Suggested trend range for 3 to 12 months is 0.97 to 1.15
• Trend range for 3 to 12 months: 0.97 to 1.15
• Action: BUY AUD/CAD (Near Floor)
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The FFCA Report – FFCA Market Comment, April 2016
AUD/CHF
2
April 2016 View :
•
•
•
•
We describe the longer term trend as lacking direction within an overall range of 0.75
to 1.05
FFCA view is that the recent weakness in AUD will give way to strength as the
world economy regains some momentum.
Switzerland continues to believe that deflation risk is higher than inflation risk. By
contrast Australia is managing through a growth pause phase and may shortly have
to re-focus on inflation risks.
The CHF is open to an officially sanctioned policy of intervention – in this case to
prevent an already strong CHF from becoming even stronger (especially vs EUR).
• Trend range for 3 to 12 months: 0.75 to 1.05
• Action: BUY AUD/CHF (Below Floor)
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The FFCA Report – FFCA Market Comment, April 2016
AUD/JPY
3
April 2016 View :
•
•
•
•
•
Longer term Uptrend is intact. Expected range 92 to 105
FFCA view – upward trend to continue with very strong conviction
Japan remains hobbled by the need for microeconomic reforms and continues its
long battle against deflation.
Renewed concerns about global financial systems would help the JPY. The prospect
cannot be ignored.
Relative to Japan, Australia scores very well on the three remaining factors
• Trend range for 3 to 12 months: 92 to 105
• Action: BUY AUD/JPY (Below Floor)
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The FFCA Report – FFCA Market Comment, April 2016
AUD/NZD
4
April 2016 View :
•
•
•
•
•
These are both commodity currencies and the countries have followed broadly
similar economic reform programs towards achieving competitive advantage.
Market pricing has generally followed the pattern of commodity pricing, though
myopic in nature, explaining the high degree of volatility in the exchange rate.
Our conviction is weak because the country scores are very close together.
In this case we cannot build high confidence in an imminent trend
The markets’ recent judgments against the AUD in general will be unwound in our
view suggesting some recovery to 125-ish.
• Trend range for 3 to 12 months: 1.05 to 1.25
• Action: BUY AUD/NZD (Lower end of Range)
10
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The FFCA Report – FFCA Market Comment, April 2016
AUD/USD
5
April 2016 View :
•
•
•
•
•
Longer term Uptrend is now seriously questionable. The markets have made a
judgment that USD is now safer than AUD. This is not our view. The markets are
pricing in Armageddon for the AUD, is this reasonable to you?
FFCA view – upward trend to continue with moderate conviction.
The USA continues to suffer from economic policy paralysis at a time in global
history of unparalleled business and social opportunities.
In something of a fortunate coincidence Australia and New Zealand undertook
separate programs of major economic reforms prior to the unexpectedly rapid
economic growth in Asia. Internal and external positives lie behind their recent
economic strength; external negatives have predominated more recently.
Suggested range for 3 to 12 months is 0.77 to 1.05
• Trend range for 3 to 12 months: 0.77 TO 1.05
• Action: BUY AUD/USD (Below Floor)
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The FFCA Report – FFCA Market Comment, April 2016
CAD/CHF
6
April 2016 View :
•
•
•
•
Longer term Downtrend is intact.
FFCA view – a trend reversal is expected which will see the CAD move above the
longer term channel towards 0.95
The CHF is open to an officially sanctioned policy of intervention – in this case to
prevent an already strong CHF from becoming even stronger. The gap in total
country scores is moderate and hence so is our conviction in the view.
Suggested range for 3 to 12 months is 0.77 to 1.00
• Trend range for 3 to 12 months: 0.77 TO 1.00
• Action: BUY CAD/CHF (Note: CHF now floating rate
regime with threat of intervention) (Below Floor)
12
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The FFCA Report – FFCA Market Comment, April 2016
CAD/JPY
7
April 2016 View :
•
•
•
•
•
Longer term Uptrend is intact
FFCA view – upward trend to continue with very strong conviction
The Canadian economic cycle is expected to resume its expansion with recovery in
USA and also greater confidence in China and European growth prospects. The
commodity cycle has been influenced strongly by new technologies, disruptive
economic sanctions and geo-politics.
Japan’s outlook is fragile and economic reforms remain urgent.
Suggested range for 3 to 12 months is 95 to 110
• Trend range for 3 to 12 months: 95 TO 110
• Action: BUY CAD/JPY (Below Floor)
13
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The FFCA Report – FFCA Market Comment, April 2016
CHF/YEN
8
April 2016 View :
•
•
•
•
Longer term Uptrend is intact though punctuated by extreme volatility between 2009
and 2013. Early in this period the Yen and Swiss Franc emerged as competitive safe
haven currencies until the Swiss moved to currency intervention in 2011 (later
reversed in January 2015). Subsequently the JPY fell heavily - no longer required as a
safe haven and embarking on monetary easing in earnest.
FFCA view – upward trend to continue with strong conviction.
While the CHF is now in a floating rate regime the SNB is continually warning that it
may intervene (to weaken the CHF).
Suggested range for 3 to 12 months is 110 to 125
• Trend range for 3 to 12 months: 110 TO 125
• Action: BUY CHF/JPY (Greater Upside)
14
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The FFCA Report – FFCA Market Comment, April 2016
EUR/AUD
9
April 2016 View :
•
•
•
•
Longer term Downtrend is intact
FFCA view – downward trend to continue with strong conviction
Having committed to a single currency EUR members now face the task of
restructuring their economies and implementing other reforms to varying degrees.
The cyclical recovery in Australia stalled through over investment in resources
mining and falling export prices. The adjustment is ongoing but beyond halfway in
our view. Even at 7%pa GDP growth China’s economy grows at USD600 billion per
annum – a useful offset to the consolidation in resources markets.
Suggested range for 3 to 12 months is 1.10 to 1.45
• Trend range for 3 to 12 months: 1.10 TO 1.45
• Action: SELL EUR/AUD (Above Ceiling)
15
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The FFCA Report – FFCA Market Comment, April 2016
EUR/CAD
10
April 2016 View :
•
•
•
•
Longer term Downtrend is intact, similar view to EUR/AUD but with less
conviction
FFCA view – downward trend to continue with only moderate conviction
Canada has yet to implement major reforms in its taxation system and therefore lags
behind Australia on Factor#2
Suggested range for 3 to 12 months is 1.15 to 1.40
• Trend range for 3 to 12 months: 1.15 TO 1.40
• Action: SELL EUR/CAD (Above Ceiling)
16
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The FFCA Report – FFCA Market Comment, April 2016
EUR/CHF
11
April 2016 View :
•
•
•
In 2011 the Swiss authorities decided to fix the value of EUR/CHF at around
120CHF and expressed a very strong determination to defend that rate. This policy
was abandoned in January 2015.
The Long term Downtrend is intact and with the CHF now refloated we expect the
downtrend to continue but with weak conviction.
Suggested range for 3 to 12 months is 1.05 to 1.20.
• Trend range for 3 to 12 months: 1.05 TO 1.20
• Action: BUY EUR/CHF (Low end of Range)
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The FFCA Report – FFCA Market Comment, April 2016
EUR/GBP
12
April 2016 View :
•
•
•
•
•
Longer term Downtrend remains intact.
FFCA view – continued downtrend with moderate conviction.
The UK economy has started its expansion and seems poised for a period of
stronger growth relative to the Euro area member countries as a Group. UK may
leave the European Union which is weighing on sentiment currently.
The UK economic reforms’ process is ahead of Euro area.
Suggested range for 3 to 12 months is 0.72 to 0.80
• Trend range for 3 to 12 months: 0.72 to 0.80
• Action: SELL EUR/GBP (At Ceiling)
18
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The FFCA Report – FFCA Market Comment, April 2016
EUR/JPY
13
April 2016 View:
•
•
•
•
•
Recent history of staccato trends with most recent being Upwards.
FFCA view – upward trend to continue with strong conviction
Even the Euro area is starting to impress with the degree of commitment to
economic restructuring and economic policy reforms. Deflation remains a risk in
Euro area but even moreso in Japan.
Euro area financial system has been strengthened but remains a high risk, especially
in political terms within the Group.
Suggested range for 3 to 12 months is 135 to 155.
• Trend range for 3 to 12 months: 135 to 155
• Action: BUY EUR/JPY (Below Floor)
19
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The FFCA Report – FFCA Market Comment, April 2016
EUR/NZD
14
April 2016 View :
•
•
•
•
•
Longer term Downtrend is intact in our view, despite recent break-out.
FFCA view – downward trend to continue with strong conviction.
The Euro area has many economic issues to resolve, internally in most cases, and
externally within the Group in all cases. New Zealand has already done the hard
yards and has strong commitments to its pillars of reform.
Global recovery momentum will trigger a re-rating of NZD.
Suggested range for 3 to 12 months is 1.44 to 1.60 EUR/NZD.
• Trend range for 3 to 12 months: 1.44 to 1.60
• Action: SELL EUR/NZD (Above Ceiling)
20
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The FFCA Report – FFCA Market Comment, April 2016
EUR/USD
15
April 2016 View :
•
•
•
•
Longer term Downtrend is intact and moved sharply lower from ceiling last year.
FFCA view – downtrend to continue with moderate conviction
Overall, in total, country scores favour USD. USD ahead in cycle and EUR ahead in
commitment to reform.
Suggested range for 3 to 12 months is 1.10 to 1.40
• Trend range for 3 to 12 months: 1.10 to 1.40
• Action: BUY EUR/USD (Low end of Range)
21
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The FFCA Report – FFCA Market Comment, April 2016
GBP/AUD
16
April 2016 View :
•
•
•
•
•
Longer term Downtrend range is no longer intact and recent move up has taken
market to well above the top of our previous ceiling.
AUD is expected to regain much of the ground it has lost as global recovery once
again comes to support commodity prices and volumes.
FFCA view – Downward trend to be re-established.
Australia claims the edge on two factors: global demand for industrial commodities,
and relative shelter from financial system concerns.
Suggested range for 3 to 12 months is 1.55 to 2.00
• Trend range for 3 to 12 months: 1.55 to 2.00
• Action: SELL GBP/AUD (Greater Downside)
22
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The FFCA Report – FFCA Market Comment, April 2016
GBP/CAD
17
April 2016 View :
•
•
•
Longer term Downtrend range is no longer intact and recent move up has taken
market to above the top of our previous ceiling.
FFCA view – Downward trend to resume and continue with weak conviction.
Suggested range for 3 to 12 months is 1.50 to 1.95
• Trend range for 3 to 12 months: 1.50 to 1.95
• Action: SELL GBP/CAD (Greater Downside)
23
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The FFCA Report – FFCA Market Comment, April 2016
GBP/CHF
18
April 2016 View :
•
•
•
•
Long term downtrend interrupted when SNB intervened in 2011. Sideways
movement since.
Longer term Downtrend of GBP/CHF remains intact but now favour a trend
reversal to Uptrend. UK leaving European Community overhanging market.
FFCA view – trend reversal with GBP moving to uptrend with moderate
conviction.
Suggested range for 3 to 12 months is 1.40 to 1.65
• Trend range for 3 to 12 months: 1.40 to 1.65
• Action: BUY GBP/CHF (Below Floor)
24
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The FFCA Report – FFCA Market Comment, April 2016
GBP/JPY
19
April 2016 View :
•
•
•
•
No long term trend is discernible using 11 years of data. The recent trend has been
upwards from 2012.
FFCA view – upward trend to continue with strong conviction (lowered from very
strong). UK departure from European Union overhanging market.
The UK economy scores strongly relative to Japan, but not as strongly as Australia,
for example.
Suggested range for 3 to 12 months is 170 to 210.
• Trend range for 3 to 12 months: 170 to 210
• Action: BUY GBP/JPY (Below Floor)
25
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The FFCA Report – FFCA Market Comment, April 2016
GBP/NZD
20
April 2016 View :
•
•
•
•
•
Longer term Downtrend is no longer intact. NZD has been hammered by anticommodity sentiment and weak global dairy prices.
FFCA view – downward trend to be re-established as global recovery momentum
returns and dairy market distortions (sanctions) ease.
In a world of accelerating world growth, albeit gradual, the New Zealand economy is
very well placed to build on its competitiveness and enjoying a high price terms of
trade. Some restrictions remain on trade in some NZ export goods and we expect
WTO progress (e.g. TPP) to provide greater impetus to the NZ trade performance.
So we view the overall economic case for GBP/NZD as favouring NZD.
Suggested range for 3 to 12 months is 1.85 to 2.20
• Trend range for 3 to 12 months: 1.85 to 2.20
• Action: SELL GBP/NZD (High end of Range)
26
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The FFCA Report – FFCA Market Comment, April 2016
GBP/USD
21
April 2016 View :
•
•
•
No long term trend discernible. GBP collapsed with onset of GFC in 2008 and has
meandered since between 1.40 and 1.70.
FFCA view – recent upward trend to continue but with weak conviction. UK is
superior in economic policy commitments and willingness to address restructuring
issues. The US economy is further along in the upswing. Recently market sentiment
has been poor due to impending referendum on leaving the European Community.
Suggested range for 3 to 12 months is 1.55 to 1.75
• Trend range for 3 to 12 months: 1.55 to 1.75
• Action: BUY GBP/USD (Below Floor)
27
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The FFCA Report – FFCA Market Comment, April 2016
NZD/CAD
22
April 2016 View :
•
•
•
•
Longer term Uptrend is intact despite recent weakness
FFCA view – upward trend to continue with moderate conviction
Arguments similar to AUD/CAD
Suggested range for 3 to 12 months is 0.87 to 0.97
• Trend range for 3 to 12 months: 0.87 to 0.97
• Action: BUY NZD/CAD (Greater Upside)
28
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The FFCA Report – FFCA Market Comment, April 2016
NZD/CHF
23
April 2016 View :
•
•
•
•
No discernible long term trend. Recent weakness initially sparked by SNB
intervention (January 2015) but plunging dairy prices took over as the year
progressed enduring into 2016.
Commodity currencies will benefit from global recovery momentum and the CHF
will lose some safe haven demand. CHF still at post GFC highs.
FFCA view – upward trend to begin with strong conviction
Suggested range for 3 to 12 months is 0.70 to 0.85
• Trend range for 3 to 12 months: 0.70 to 0.85
• Action: BUY NZD/CHF (Below Floor)
29
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The FFCA Report – FFCA Market Comment, April 2016
NZD/JPY
24
April 2016 View :
•
•
•
•
•
Longer term Uptrend is still intact
FFCA view – upward trend to continue with very strong conviction
The relative fundamental factors driving up the NZD/JPY pair are and have been
well documented in our earlier reports. Weakness in global dairy prices has been the
most powerful negative.
Expect gradual turnaround as dairy prices strengthen again and global growth
momentum returns.
Suggested range for 3 to 12 months is 85 to 95
• Trend range for 3 to 12 months: 85 to 95
• Action: BUY NZD/JPY (Below Floor)
30
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The FFCA Report – FFCA Market Comment, April 2016
NZD/USD
25
April 2016 View :
•
•
•
•
Longer term Uptrend is no longer intact as NZ economic recovery momentum was
weakened by collapsing dairy prices. Economic sanctions against Russia and
reciprocal actions have disrupted global dairy markets and driven the prices lower.
Lower prices have occurred during a period of generally falling commodity prices
and weak global recovery momentum.
FFCA view – upward trend to resume with strong conviction. The global economy
is set to recover gradually.
The USA has failed to address its fundamental weaknesses in fiscal policy. Neither
has tax reform occurred.
Suggested range for 3 to 12 months is 0.75 to 0.92
• Trend range for 3 to 12 months: 0.75 to 0.92
• Action: BUY NZD/USD (Below Floor)
31
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The FFCA Report – FFCA Market Comment, April 2016
USD/CAD
26
April 2016 View :
•
•
•
This is another pair involving a commodity currency and the USD. Global oil prices
have collapsed during 2015 in response to new supply technologies and recently
supply increases.
2015 has been a lucky year for the USD. Commodity currencies and economies have
been weakened despite the global economy being in upswing. The US has benefited
from low commodity prices, and therefore benign inflation, and while US growth has
only been moderate the rate has been impressive relative to Japan and Europe.
Suggested range for 3 to 12 months is 1.03 to 1.25
• Trend range for 3 to 12 months: 1.03 to 1.25
• Action: SELL USD/CAD (Above Ceiling)
32
Website: www.fourfactorforex.com
Four Factor Forex Limited
The FFCA Report – FFCA Market Comment, April 2016
USD/CHF
27
April 2016 View :
•
•
•
•
•
Longer term Downtrend is still intact.
FFCA view – favour trend reversal but with weak conviction
US policy gridlock is set to continue – next Presidential election is November, 2016.
We view policy gridlock in USA as biggest obstacle to a more positive view of the
USD in general.
SNB wants to intervene to weaken the CHF.
Suggested range for 3 to 12 months is 0.88 to 1.05
• Trend range for 3 to 12 months: 0.88 to 1.05
• Action: NEUTRAL (Mid-Range)
33
Website: www.fourfactorforex.com
Four Factor Forex Limited
The FFCA Report – FFCA Market Comment, April 2016
USD/JPY
28
April 2016 View :
•
•
•
•
Major trend reversal occurred at the end of 2011 with unexpected initiatives in Japan
to ease monetary conditions and go for growth. Evidence of moderate expansion
was emerging from US and the shock effects of the GFC were starting to wear off.
FFCA view – upward trend to continue with now moderate conviction.
Biggest risk is some repeat of a GFC. This possibility cannot be ignored in our
timeframe.
Suggested range for 3 to 12 months is 105 to 120.
• Trend range for 3 to 12 months: 105 to 120
• Action: NEUTRAL (Mid-Range)
34
Website: www.fourfactorforex.com
Four Factor Forex Limited
The FFCA Report – FFCA Market Comment, April 2016