currency watch list 1

8/10/2019 Currency Watch List 1

1/20

real trader.

real results. verified.JarrattDAVIS

CURRENCYWATCH LIST

CURRENCY

WATCH LIST
http://www.jarrattdavis.com/blog/http://www.jarrattdavis.com/blog/http://www.jarrattdavis.com/blog/http://www.jarrattdavis.com/blog/http://www.jarrattdavis.com/blog/


2/20

real trader.


Currenc

yWatchList

ECB summary

The ECB are still very focused on ination because it is way

below their 2% target and the main way a central bankincreases ination 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

EURO

SellKey Economic Indicators

watched by ECB:

EU Inflation (Target 2%)

Next update03 November 2014

EUR


3/20

real trader.


Currenc

yWatchList

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 ECBs 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 andmost 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

wouldnt 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 ECBs next move will

be.

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

against the stronger currencies on any rallies that occur from

short term sentiment

The ECB are now in the

midst of the next round of

easing which is designed

to give further stimulus to

the agging EU economy.
http://www.jarrattdavis.com/blog/http://www.jarrattdavis.com/blog/http://www.jarrattdavis.com/blog/http://www.jarrattdavis.com/blog/http://www.jarrattdavis.com/blog/http://www.jarrattdavis.com/blog/


4/20

real trader.


CurrencyWatchList

BOJ summary

BOJ unexpectedly increased the amount of stimulus it

injects into the economy

The bank revised their growth and ination forecasts

lower

Markets were expecting further measures but these

came much sooner

The bank have now demonstrated that they will dowhatever it takes to hit its 2% ination target by end of

2015

Japanese Yen

Sell

Key Economic Indicators watched by BOJ:

Inflation (Target 2%)


JPY


5/20

real trader.


CurrencyWatchList


After Kuroda announced further QE he also stated that the bank isprepared 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 getback 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.

At the latest bank ofJapans meeting they

revised down their 2014

ination forecast to 1.2%

from 1.3% showing that

they now recognize that

there are still challenges

ahead for them to hit their

ination target.


6/20

real trader.


CurrencyWatchList

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 Zealands GDP


RBNZ summary

The RBNZ have intervened to sell NZD aggressively during

August 2014 and have not ruled out further action to getNZD 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

NZD


7/20

real trader.


CurrencyWatchList


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 around0.6500.

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.

The RBNZ have now

ended any prospects forfurther 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 sameperiod.


8/20

real trader.


CurrencyWatchList

Swiss Franc

Sell

Key Economic Indicatorswatched by SNB:

Exchange rate of EURCHF

currency pair (They areprotecting 1.2000)

Next update

03 November 2014

SNB summary

SNB continue to defend the oor on the EUCHF pair,

they see it as the best way to protect their policy targets,although this is not indenite.

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

CHF


9/20

real trader.


CurrencyWatchList


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 themarket 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.

The Swiss National Bank

are notoriously secretiveand low key about their

thoughts on monetary

policy, and chose only to

speak a few times per

year.


10/20

real trader.


CurrencyWatchList

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 ock

to the currency as a safety play.


11/20

real trader.


CurrencyWatchList

US Dollar

Buy


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 ination data

and quality of labour market recovery

They have now fully ended their QE programme and are

looking towards their rst rate hike

As it stands the Fed are generally considered to be in the

lead when it comes to raising rates next with the rst hike

expected in mid-2015

USD


12/20

real trader.


CurrencyWatchList


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 despitethe 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 Latest FOMC was

much anticipated and

was much more hawkish

than the market was

anticipating.


13/20

real trader.


CurrencyWatchList

Australian Dollar

Buy


watched by RBA:

Australian Inflation (Target

2- 3%) - RBA commentsand 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 RBAs cautiously positive outlook on the economy

RBA still claim that AUD is overvalued against the USD

AUD


14/20

real trader.


CurrencyWatchList


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 AUDsupported 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 longerterm buying opportunities against very low interest rate

currencies.

Recently, the bank has

stated that the currency is

overvalued and that based

on the fundamentals the

currency still has some

way to fall.


15/20

real trader.


CurrencyWatchList

Great BritainPound

Buy

Key Economic Indicators watched by BOE:

Inflation (Target 2%),

Employment data (Looking

for quality, particularly in areassuch 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 therecovery 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

GBP


16/20

real trader.


CurrencyWatchList


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 linewith 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 UKs 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 beforethe other banks.

Recent data from the

UK has given the bank

more room to breathe

when considering their

rst rate hike. This was

highlighted by the October

CPI reading which came

out much lower than the

expected number (1.2%)


17/20

real trader.


CurrencyWatchList

Canadian Dollar

Sell


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 biason rates

More recently Poloz has stated that a sign of a truly

strengthening economy is if Canadians were working

longer hours

CAD


18/20

real trader.


CurrencyWatchList


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 tothe 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.

Poloz has recently stated

that he will adjust rateswithout notice when the

BoC deem it appropriate

and it is up to the markets

to gure out when that

will happen based on the

data.


19/20

real trader.


CurrencyWatchList

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.


20/20

real trader.


Follow me everyday here: 1

41101

currency watch list 1

Documents