GBPJPY trend & momentum 23-Dec-2014

GBPJPY trend and momentum has indicated it starts going down slightly since earlier today, though the trend signal is still upward (flat) at the moment.

Currently, GBPJPY at around 186.55 has dropped for last a few hours. Traditionally, JPY is relatively stronger under risk-off market. If market players mitigate risk on their portfolio,  JPY could be stronger against other major currencies but rebound risk is also expected early new year.

EURUSD Trend & momentum 22-Dec-2014

EURUSD, the trend and momentum indicates it is going up in a coming week up to the last trading date of this year.

Christmas is comng middle of this week, and the market is expected to be quiet during that time, particularly in European and US market. It implies the market is relatively sensitive to a few player and FX could easily jump in the quiet market.

FX rate for last 10 years against USD 21-Dec-2014

As you know, Russian Ruble (RUB) has massively dropped in its value against other major currencies, particularly against USD,  since the Crimea issue and crude oil price plunged.

This RUB dropping is one of topics in the latest FX market, however other major currencies have been under the trend reversal for last ten years over the Lehman crisis.


1. Currencies down around 50% for last 10 years

< Figure I >

 The chart on the right describes the change rate of USD value per each currency value per since Dec 2004. RUB value has gone down to less than half of the value at 2004, and South African Rand (ZAR) value has also dropped around half of the value at 2004.



2. Brazilian real

< Figure II >

BRLUSD have changed only 1.1% from 2004, but the current value has gone down 42% from maximum value in last 10 years. BRLUSD at Dec 2011 was around 0.5358 and BRLUSD at Dec 2014 is around 0.3743.

If you bought 3yr BRL bond for BRL 2M at Dec 2011, the equivalent value in USD is

 (Issue at Dec 2011) 1,071,600 [USD]
 (Redemption at Dec 2014) 748,600 [USD].

It means you would lose 323,000 [USD] from this investment. BRL is a non-deliverable currency, and it could be settled in USD. Even if the interest rate in BRL is as high as 5.0%, the capital loss could not be covered.


3. Trend reversal within last 3 years
Another remarkable trend reversal after the Lehman crisis could be observed in JPY and AUD whose values have been downward trend since 2012 - 2013. Those currencies are considered relatively stronger after the Lehman crisis but the trend has reversed around that time.

< Figure III >

JPY has dropped against major currencies since the Japanese election on Dec 2012 and quantitative easing with the new administration. Australian interest rate has cut from 4.25% (Jan 2012) to 2.50% (Aug 2013) record low level, and AUD has turned into downward trend for that time and after. JPYUSD and AUDUSD have changed -34% and -17% respectively for last 3 years only though -14% and +4.7% for last 10 years.


4. General comments
AUD, CAD, SEK, NOK and RUB, which are considered sensitive to the oil price, have gone down later 2014 due to the crude oil price down.

< Figure IV >

GBP, NZD and CHF have been on flattened trend relatively since 2011 while other currencies have started dropping against USD.

< Figure V >

For earlier 2015, the crude oil price is one of the biggest factors leading financial trend. RUB is the most sensitive currency at the moment. If those were going to out of control, emerging market could collapse and even the developed markets could be in crisis like domino.


Related posts)
Stock Market Risk: Correlation and Triple top 26-Nov-2014
Crude Oil vs Stock market in correlation 1-Dec-2014

NZDJPY Trend & momentum 18-Dec-2014

NZDJPY has been upward trend for this week, and it stays around 92.0 now. The trend and momentum has indicated NZDJPY on flatter upward trend up to later today in universal time. It implies the upside of NZDJPY could be limited in a coming week. Fundamentals news seems have been released enough in New zealand, and Japanese stock index N225 has jumped in large scale, which is correlated with JPY down.

 

AUDNZD Trend & Momentum 17-Dec-2014

AUDNZD stays around 1.053. The latest trend and momentum indicates AUDNZD is expected to go up in a next one week.

Downside risk is that AUD has relatively vulnerable for crude oil price down for last some weeks, and uncertainty of further downturn in crude oil market. It could be downside risk at AUD.

NZDCAD Trend & Momentum 16-Dec-2014

NZDCAD currently stays around 0.906. NZDCAD has hiked for the last week and reached the highest level 0.915 since the beginning of this month.

The trend and momentum indicates NZDCAD could turn into downward trend in a coming week targeting around 0.880 the lowest level for last two weeks.

Some market analysts say that RUB has been sold massively due to the crude oil price going down remarkably, and the currencies of countries with plenty of natural resources, such as CAD, AUD or emerging currencies have been weak against other major currencies. It implies CAD is still under the uncertainty of fundamentals factor though the signal indicates NZDCAD downward trend.


Tweet

For more currency pairs, Forex trend & momentum signals available on Google play.

GBPJPY Trend & Momentum 15-Dec-2014

GBPJPY had jumped in larger scale from the end of Nov to early Dec. It has gone down for the last week, and GBPJPY has reached the same level around the end of last month. The range for last two weeks was around 185 - 189, which is relatively wide range.

The election has been held in Japan, and it resulted as market expected. Basically liberal-democratic party winning should work for JPY down, however the result was widely expected in the market already. JPY is stronger against major currencies, such as USD, GBP or EUR after FX market opened this week.

Trend and momentum of GBPJPY indicates it could be going up in this week. On the other hand, uncertainty in JPY has been mitigated as the election ended as expected, and the upside could be limited because the election result has been already taken into account.


Tweet

For more currency pairs, Forex trend & momentum signals available on Google play.

Probability of Default for average person 12-Dec-2014

Probability of Default is shortly called PD, the probability that individuals or entities become insolvent.

Although the most of people earning average salary may not think of their becoming insolvent near future, mathematical analysis shows certain level of the probability of default for average people.

(Example 1)
 UK household
 Employee
 30 - 34 years old
 Savings: 5,000 [GBP]
 Salary: 30,000 / 1Y [GBP]

 Bonus: 5,000 / 1Y [GBP]

 Expense: 15,000 / 1Y [GBP] + Loan repayment

 Loan 15Y: Outstanding 150,000 [GBP], repayment: 900 / 1M [GBP]

Probability of Default is 72.0% for next 15 years. (35.0% for next 10 years.)

(Example 2)
 US household

An US household

 Employee
 30 - 34 years old
 Savings: 4,000 [USD]
 Salary: 45,000 / 1Y [USD]

 Bonus: 7,000 / 1Y [USD]

 Expense: 30,000 / 1Y [USD] + Loan repayment

 Loan 15Y: Outstanding 120,000 [USD], repayment: 750 / 1M [USD]

Probability of Default is 72.2% for next 15 years. (36.0% for next 10 years.)

The analysis is based on mathematical models. Future income, expense and employer's credit are modeled as uncertain factors. It does not take into account changing jobs or financial assets other than own savings.

You can quote your own Probability of Default at http://www.iamdefault.com/AnalysisInput.php.

Crude Oil vs Stock market in correlation 1-Dec-2014

Crude oil price has declined for last two months in large scale while the stock market look competitive in major stock indices.

Basically simply thinking, oil importer have benefit from the oil price down and exporter will suffer from it.

For example, US, UK and Japan has imported oil more than exporting, and they should have benefit from oil price down.

< Figure I > 75% of correlation

However, looking at stock market, it seems that they have not always had the benefit.

Figure I shows 20yr historical values of Dow Jones industrial average [USD] and WTI Crude Oil price [USD]. The correlation of them is around 75%, which means the stock index and oil price are highly correlated each other.

< Figure II > 52% of correlation

Figure II shows 20yr historical values of FTSE 100 [GBP] and WTI Crude Oil price [USD]. The correlation of them is around 52%. It is less than US market, but it could be said highly correlated.

Figure III shows 20yr historical values of NIKKEI 225 [JPY] and WTI Crude Oil price [USD]. Different from US and UK market, the correlation between the stock and oil price is around -40%, which means the stock price tends to go up while the oil price goes down.

Observing WTI Crude Oil price, the largest declining has been occurred at Lehman crisis, and larger up & down for last 2-3 years.

< Figure III > -40% of correlation

The point is whether current downward trend is just a part of up & down or beginning of oil crisis.

If the oil price is going down further, it concerns the stock indices which are highly correlated can be going down.

Even in Japanese stock market, the stock price has largely declined while the oil price is going down.

Global stock market has been volatile particularly for last a few months, and the oil price is remarkably going down. The low oil price bring benefit for oil importers but it may cause deflation in the market and this can be a downside factor in stock markets.

It will not wasted to re-balance risky portfolio into conservative now.

EURNZD Trend & Momentum (Following) 1-Dec-2014

Last post EURNZD.

EURNZD currently staying around 1.581 after it has reached at 1.599 very earlier today. The box range trend is still to be expected below 1.600 and bottom could be 1.570 - 1.580.

However, fundamentals risk exist particularly in EUR due to the economic situation. Some market players analyze inflation in EUR for next year could be negative (deflation), and ECB announced they still have room to bring QE.
It seems down side risk at EUR is remaining and EURNZD could break its expected range if further concerns or down side information were revealed.

Ref)
http://uk.reuters.com/article/2014/12/01/global-economy-weekahead-idUKKCN0JF27G20141201