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.


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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.


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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