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CurrenCy CurrenCy Watch Watch List List Jarratt DAVIS real trader. real results. veri ed.

CurrenCy CurrenCy

Watch Watch List List

CurrenCy CurrenCy Watch Watch List List Jarratt DAVIS real trader. real results. veri ed.
CurrenCy CurrenCy Watch Watch List List Jarratt DAVIS real trader. real results. veri ed.
CurrenCy CurrenCy Watch Watch List List Jarratt DAVIS real trader. real results. veri ed.

Currency Watch List

Currency Watch List EUR EURO Sell Key Economic Indicators watched by ECB: EU Inflation (Target 2%)

EUR

EURO

Sell

Key Economic Indicators watched by ECB:

EU Inflation (Target 2%)

Next update

03 November 2014

eCB summary

• The ECB are still very focused on inflation because it is way below their 2% target and the main way a central bank increases inflation is by cutting interest rates, the ECB cut rates for a second time this year in their latest meeting.

• ECB have stated a weaker Euro is positive for the recovery

• The bank have now started their bond buying programme and are looking to expand it over the coming weeks

the recovery • The bank have now started their bond buying programme and are looking to

Currency Watch List

Currency Watch List The ECB are now in the midst of the next round of easing

The ECB are now in the midst of the next round of easing which is designed to give further stimulus to the flagging EU economy.

Central Bank Analysis

After cutting rates several times over the past 12 months they have now begun their ABS bond buying programme. They have already purchased French, Portuguese, Spanish, Italian and German bonds so far, and are buying in parcels of 5 – 20 million Euros.

The ECB’s covered bond purchases program came in at EUR 1.7bln on October 27th 2014, slightly above the markets expectations.

The market is concerned that purchasing bonds in this way may not be enough to halt the economic slump and that further measures may need to be taken. The ECB have responded to this by stating that they are prepared to use further measures if needed, including corporate bond buying which is seen as more risky.

The market will be paying VERY close attention to this programme and most importantly how it starts to impact the inflation data (CPI) from Europe. If there is still no material improvement then the ECB will be expected to add further measures which will be seen as even more negative for the Euro.

Of note, last week, Hawkish ECB member Nowotny stated that he wouldn’t rule out QE which the market saw as very dovish (Coming from a Hawk) and thus another step closer to full blown QE.

As we stand we need to see how this programme plays out and watch

the next few CPI readings to get an idea of what the ECB’s next move will

be.

“The easiest way to trade the Euro right now is to

be. “The easiest way to trade the Euro right now is to sell it against the

sell it

“The easiest way to trade the Euro right now is to sell it against the stronger

against the stronger currencies on any rallies that occur from

short term sentiment”
short term sentiment”
the Euro right now is to sell it against the stronger currencies on any rallies that
the Euro right now is to sell it against the stronger currencies on any rallies that
the Euro right now is to sell it against the stronger currencies on any rallies that

Currency Watch List

Currency Watch List JPY Japanese Yen Sell Key Economic Indicators watched by BOJ: Inflation (Target 2%)

JPY

Japanese Yen Sell

Key Economic Indicators watched by BOJ:

Inflation (Target 2%)

Next update

03 November 2014

BOJ summary

• BOJ unexpectedly increased the amount of stimulus it injects into the economy

• The bank revised their growth and inflation forecasts lower

• Markets were expecting further measures but these came much sooner

• The bank have now demonstrated that they will do

whatever it takes to hit it’s 2% inflation target by end of

2015

• The bank have now demonstrated that they will do whatever it takes to hit it’s

Currency Watch List

Currency Watch List At the latest bank of Japans meeting they revised down their 2014 inflation

At the latest bank of Japans meeting they revised down their 2014 inflation forecast to 1.2% from 1.3% showing that they now recognize that there are still challenges ahead for them to hit their inflation target.

Central Bank Analysis

After Kuroda announced further QE he also stated that the bank is prepared to take further action if required and do ‘whatever it takes’ to reach the 2% target for CPI.

This caused the markets to sell off JPY in huge amounts and this sentiment is expected to continue over the coming months.

All eyes are now on the CPI data from Japan, because as this shows improvement the bank will look to withdraw stimulus thus reversing the recent weakening. As it stands we expect the currency to continue weakening into 2015 and any pullbacks being seen as opportunities to get back into the market at a better price.

Look for JPY to be one of the weakest currencies over the coming months and try and sell it against stronger currencies, especially those that are going in the opposite direction I terms of monetary policy.

sell it against stronger currencies, especially those that are going in the opposite direction I terms
sell it against stronger currencies, especially those that are going in the opposite direction I terms

Currency Watch List

Currency Watch List NZD New Zealand Dollar Buy Key Economic Indicators watched by the RBNZ: Inflation

NZD

New Zealand Dollar Buy

Key Economic Indicators watched by the RBNZ:

Inflation (Target 2 – 3%),

Exchange rate of NZDUSD (Do not want it to reach 0.9000 levels) they in fact want to see it at 0.6500

Global Milk Prices – Dairy trade accounts for 7% of New Zealand’s GDP

Next update

03 November 2014

rBnZ summary

• The RBNZ have intervened to sell NZD aggressively during August 2014 and have not ruled out further action to get NZD weaker against the USD

• New Zealand has one of the most attractive investment yields and the NZD is a very attractive carry trade, especially against currencies with very low interest rates

• The bank removed any reference to further rate hikes to follow the ones triggered in 2014

• They cited a concern over falling CPI

removed any reference to further rate hikes to follow the ones triggered in 2014 • They

Currency Watch List

Currency Watch List The RBNZ have now ended any prospects for further rate hikes in the

The RBNZ have now ended any prospects for further rate hikes in the next 6 months by simply removing any reference to the need for ‘further tightening’. This gives the NZD extra weakness against those currencies that are on the cusp of rate hikes during the same period.

that are on the cusp of rate hikes during the same period. Jarratt DAVIS real trader.

Central Bank Analysis

The bank are also determined to weaken the currency at any opportunity they get after stating that they would like to see the NZDUSD rate at around

0.6500.

The reason inflation has dropped off is due to global milk prices falling which make up to 7% of the GDP. Because they have fallen so much this has dragged down the overall inflation figure for the nation as a whole.

This means that we should pay particular attention to these milk prices because when they start recovering this could see inflation once again become a trigger for further rate hikes.

When these rate hikes come back onto the agenda we expect to see traders once again gravitate to the NZD and start buying it back.

The easiest way to trade the currency right now is to buy it against weaker currencies with low interest rates, because despite the bank being so dovish it remains a very attractive carry trade, for traders looking for yield.

Do not buy this currency against stronger currencies that are expecting a rate hike in 2015.

traders looking for yield. Do not buy this currency against stronger currencies that are expecting a
traders looking for yield. Do not buy this currency against stronger currencies that are expecting a
traders looking for yield. Do not buy this currency against stronger currencies that are expecting a

Currency Watch List

Currency Watch List CHF Swiss Franc Sell Key Economic Indicators watched by SNB: Exchange rate of

CHF

Swiss Franc Sell

Key Economic Indicators watched by SNB:

Exchange rate of EURCHF currency pair (They are protecting 1.2000)

Next update

03 November 2014

SnB summary

• SNB continue to defend the floor on the EUCHF pair, they see it as the best way to protect their policy targets, although this is not indefinite.

• CHF is naturally a safe haven investment and traders tend to buy it as a reserve, causing it to strengthen during volatile times and market crashes, the SNB are actively trying to discourage this buying and have so far spent billions keeping the value of the currency lower than it naturally would be.

• The prudent course of action is to err on the side of the central bank and sell CHF against strong currencies, whilst being aware of this safe haven phenomenon.

• Analysts expect the bank to hike their rate in mid 2016

currencies, whilst being aware of this safe haven phenomenon. • Analysts expect the bank to hike

Currency Watch List

Currency Watch List The Swiss National Bank are notoriously secretive and low key about their thoughts

The Swiss National Bank are notoriously secretive and low key about their thoughts on monetary policy, and chose only to speak a few times per year.

policy, and chose only to speak a few times per year. Jarratt DAVIS real trader. real

Central Bank Analysis

The flip side is that they change their policy extremely infrequently which makes the CHF a very stable currency to trade.

The current status is that they wish to keep the price of their currency as low as possible, particularly against the Euro, as Europe is its largest trading partner. They are constantly battling with the market over this which sees the CHF as a very solid, stable currency to invest in during hard economic times.

They have recently stated that they have not intervened for “months”

and that the fair price fundamentally for the EURCHF pair is at around

1.2800.

They have also stated that a negative interest rate is a possibility but not something they are looking to adopt as part of their ‘plan a’ policy.

Market analysts (UBS Bank particularly) have stated that the SNB are facing an extreme ‘dilemma’ of trying to keep CHF so low and that the low rates are causing the housing market is getting overheated and unhealthy.

We have a situation where the SNB continue to talk the currency down and desperately try and stop it getting stronger while at the same time the market starting to realise that rates may have to go up at some point over

the next 12 – 18 months regardless of what the bank say.

to realise that rates may have to go up at some point over the next 12
to realise that rates may have to go up at some point over the next 12
to realise that rates may have to go up at some point over the next 12

Currency Watch List

As we stand we side with the SNB and remain bearish but are sensitive to what the wider market think and say … If more analysts and economists start calling for higher rates we could see a real momentum form which could strengthen CHF in the medium term.

On the other side of the coin the CHF is a very stable currency that attracts investors during times of safe haven flows and market panics. Because of this stability traders do like to use the currency as a hedge against bad times in the stock market or when traders are generally trying to avoid risk for one reason or another.

During these times the CHF performs well in the short term along with Japanese Yen.

“The best way to trade CHF is against strong currencies that have solid upside potential, and particularly currencies that have a higher interest rate than Switzerland, while being very careful at times of market panic when traders will flock to the currency as a safety play.”

panic when traders will flock to the currency as a safety play.” Jarratt DAVIS real trader.
panic when traders will flock to the currency as a safety play.” Jarratt DAVIS real trader.
panic when traders will flock to the currency as a safety play.” Jarratt DAVIS real trader.

Currency Watch List

Currency Watch List USD US Dollar – Buy Key Economic Indicators watched by the Fed: Inflation

USD

US Dollar – Buy

Key Economic Indicators watched by the Fed:

Inflation (Target 2%), Employment figures (Looking for sustained improvement)

Next update

03 November 2014

Fed summary

• They are upbeat about overall outlook including unemployment rate and growth

• Concerns include weaker than expected inflation data and quality of labour market recovery

• They have now fully ended their QE programme and are looking towards their first rate hike

• As it stands the Fed are generally considered to be in the lead when it comes to raising rates next with the first hike expected in mid-2015

are generally considered to be in the lead when it comes to raising rates next with

Currency Watch List

Currency Watch List The Latest FOMC was much anticipated and was much more hawkish than the

The Latest FOMC was much anticipated and was much more hawkish than the market was anticipating.

Central Bank Analysis

Going into the event the market was expecting the fed to be dovish and there were even rumours that they might avoid ending QE completely amid concerns about the recovery losing momentum.

These concerns were short lived as they did indeed end QE, and despite the fact that the phrase “considerable time” remains part of their statement the markets now know that the next move for the Fed is a rate hike.

From this point in all eyes will be on the CPI data because this needs to start showing at least some signs of building momentum towards hitting the feds 2% target in order for those rate hike expectations to be solidified.

This is a medium term goal and the positive momentum should remain through to the end of the year, with traders looking to keep buying USD against the weaker currencies.

From here on in we are watching the data very closely and using this to guide us in how we think the Fed will move next.

The simplest way to trade the USD right now is to buy it against the weaker currencies, every time these pairs pull back

The simplest way to trade the USD right now is to buy it against the weaker

Currency Watch List

Currency Watch List AUD Australian Dollar Buy Key Economic Indicators watched by RBA: Australian Inflation (Target

AUD

Australian Dollar Buy

Key Economic Indicators watched by RBA:

Australian Inflation (Target 2- 3%) - RBA comments and speeches (looking for less neutral comments)

Next update

03 November 2014

rBA summary

• Growth is sluggish while the property market risks overheating presenting a dilemma of hold or hike on rates

• Analysts speculate a hike in the third quarter of 2015 due to the RBA’s cautiously positive outlook on the economy

• RBA still claim that AUD is overvalued against the USD

due to the RBA’s cautiously positive outlook on the economy • RBA still claim that AUD

Currency Watch List

Currency Watch List Recently, the bank has stated that the currency is overvalued and that based

Recently, the bank has stated that the currency is overvalued and that based on the fundamentals the currency still has some way to fall.

on the fundamentals the currency still has some way to fall. Jarratt DAVIS real trader. real

Central Bank Analysis

They also stated that the current price levels are “unhelpful” to the current economic difficulties that Australia is facing.

This has led to speculation that the bank could take measures beyond merely ‘talking’ the currency down, which could lead to fresh weakness. These rumours however are not tradable.

The question still remains: Will the RBA chose to battle the sluggish economy or the overheating housing market and whichever way they go could mean either rate hikes or cuts in the near future.

For now they will ‘wait and see’ and this neutral stance should keep AUD supported against those currencies with a much more negative outlook for rates.

We do need to keep a very close eye on their comments and movements as we head into 2015 because we are at a stage where they could quite feasibly go either way with their rate depending on which economic issue they perceive to be most threatening.

“The best way to trade AUD at this stage is to sell it on the rallies against stronger currencies while looking for longer

term buying opportunities against very low interest rate currencies.”

stronger currencies while looking for longer term buying opportunities against very low interest rate currencies.”
stronger currencies while looking for longer term buying opportunities against very low interest rate currencies.”
stronger currencies while looking for longer term buying opportunities against very low interest rate currencies.”

Currency Watch List

Currency Watch List GBP Great Britain Pound Buy Key Economic Indicators watched by BOE: Inflation (Target

GBP

Great Britain Pound Buy

Key Economic Indicators watched by BOE:

Inflation (Target 2%), Employment data (Looking

for quality, particularly in areas such as wages and average earnings)

Next update

03 November 2014

BOe summary

• The bank have made it clear that any rate hikes is very data dependent and that they will be watching the recovery before committing to any timings

• Data has been very mixed / weak of late adding to speculation that a hike may be further away

• Two members of the BoE have dissented in favour of hiking rates in September 2014

• The BoE committee is generally opposed to hiking too soon

• General market expectations are now for a hike in around September 2015

is generally opposed to hiking too soon • General market expectations are now for a hike

Currency Watch List

Currency Watch List Recent data from the UK has given the bank more room to breathe

Recent data from the UK has given the bank more room to breathe when considering their first rate hike. This was highlighted by the October CPI reading which came out much lower than the expected number (1.2%)

Central Bank Analysis

This removes all pressure to hike and could now cause the bank to delay their rate hike until much later in 2015 than previously thought.

Average earnings also remained fairly weak, despite coming out in line with analysts expectations.

On top of this we have had extremely dovish minutes showing that the bank is concerned about struggling growth in the Euro zone and the impact that this will have on the UK’s own recovery. The market now expects any hike to come at the later end of 2015.

This is still data dependent and if we get a run of positive data (especially CPI) the tone could shift and rate expectations could once again be brought back to early 2015.

General data has not been particularly impressive.

The fact that this simply supports the banks apprehension to hike at any time soon, we will be looking to sell the GBP, particularly against USD.

“For longer term traders, these short term GBP sell offs against clearly weaker currencies should be viewed as an opportunity to start buying it back for longer term positions due to the fact that the UK will still hike their rate much before the other banks.”

it back for longer term positions due to the fact that the UK will still hike
it back for longer term positions due to the fact that the UK will still hike
it back for longer term positions due to the fact that the UK will still hike

Currency Watch List

CADCurrency Watch List Canadian Dollar Sell Key Economic Indicators watched by BOC: CPI Inflation (Target 1-3%),

Canadian Dollar Sell

Key Economic Indicators watched by BOC:

CPI Inflation (Target 1-3%), Major headline figures, GDP, Unemployment

Next update

03 November 2014

BOC summary

• Poloz has stated that even if economic data shows an incredible recovery ‘overnight’ there will still be plenty of room for recovery and thus no rush to raise rates.

• The main issue for BoC is the housing bubble that is forming in Canada along with rising debt levels that call for an increase in rates to stop them spiralling out of control

• The BoC have removed their forward guidance which means they will no longer be telling the market their bias on rates

• More recently Poloz has stated that a sign of a truly strengthening economy is if Canadians were working longer hours

• More recently Poloz has stated that a sign of a truly strengthening economy is if

Currency Watch List

Currency Watch List Poloz has recently stated that he will ‘adjust’ rates without notice when the

Poloz has recently stated that he will ‘adjust’ rates without notice when the BoC deem it appropriate and it is up to the markets to figure out when that will happen based on the data.

to figure out when that will happen based on the data. Jarratt DAVIS real trader. real

Central Bank Analysis

This leaves a huge risk of a major surprise. To counter this we need to be watching the things he is watching VERY closely for signs that a change to the rate may be coming.

To help with this he has recently placed heavy focus on the length and amount of hours that Canadians are working. This means that he is making labour market slack as a key indicator that will help drive a decision on when to start hiking their rate, which has been at 1% since 2010.

GDP figures came out at -0.1% which was worse than the market was expecting which in turn now adds to the overall bearish outlook on The CAD as a currency.

We still expect the next move to be a hike but have no idea when, but current bets suggest some point at the start of 2016.

We do know that they want to hold off from any hikes for as long as they can but are coming under increasing pressure via a housing bubble and increased debt levels in Canada. These factors can be cured simply by interest rate hikes but by increasing the rate they will hamper their fragile economic recovery which is struggling to gain any momentum at this stage.

the rate they will hamper their fragile economic recovery which is struggling to gain any momentum
the rate they will hamper their fragile economic recovery which is struggling to gain any momentum
the rate they will hamper their fragile economic recovery which is struggling to gain any momentum

Currency Watch List

Recent data has been mixed to say the least with no real signs of a firm recovery taking hold across the full spectrum of the economy. As long as this continues then the bank will be perfectly happy to hold as they are and leave rates unchanged.

They recently removed the wording which stated that the bank were ‘neutral’ on their rate policy which is designed to remove any hints at a rate direction.

All Canadian data is fairly irrelevant unless we start to see a clear trend of either positive or negative numbers that could sway the bank either way. We do not expect this out look to change over the coming 3 months.

“The simplest course of action on the CAD is to sell it against those currencies that are considering rate increases within the next 12 months.”

that are considering rate increases within the next 12 months.” Jarratt DAVIS real trader. real results.
that are considering rate increases within the next 12 months.” Jarratt DAVIS real trader. real results.
that are considering rate increases within the next 12 months.” Jarratt DAVIS real trader. real results.
 

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me everyday here: 141101           Jarratt DAVIS real trader. real results. veri
me everyday here: 141101           Jarratt DAVIS real trader. real results. veri
me everyday here: 141101           Jarratt DAVIS real trader. real results. veri