Forex Investment and Currency Trading

Commodities have not participated in the recent bout of USD selling. Weakness in the global economy clearly remains the key concern. Moreover, leading indicators of global activity suggest the first quarter of next year is unlikely to see much improvement. This is important from the point of view of the AUD, the best correlation with the A$ during global downturns is commodity prices.
The second factor is weak domestic data through Q1. To date the Australian economy has weathered the global downturn reasonably well. However, virtually all the leading indicators of employment are suggesting rising unemployment through the first half of [...]

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EUR/USD expected to fall to 1.20/1.25 in the first half of 2009, while GBP/USD is expected to test 1.40. The ECB and the BoE will cut rates further, with the ECB having the most work to do.
Both EUR and GBP will strengthen against the USD in 2009 H2 but neither currency is likely to re-visit its highs against the USD from earlier this year. Look to sell EUR/ GBP in Q2 of next year, as GBP should benefit more from global reflation and lower risk aversion across global markets.

FX Strategy - Sell EUR/USD to open the new year, looking for a move [...]

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Remain constructive on USD/CAD into yearend and the first part of 2009 despite the collapse from 1.30 to 1.15 during the last two weeks. Following record large moves in October and continued elevated price volatility, one is advised to deem forecasts as directional calls rather than
absolute targets as there is a wider-than-normal confidence interval around these point forecasts. Further broad-based USD strength, expected to last well into 2009 as liquidity fears and safe-haven demand dominates, will provide renewed upward momentum to USD/CAD during the next six months.
Add to this depressed commodity prices, softer domestic data (Aug GDP declined by 0.3%) and a [...]

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CNY

CNY remains very strong on a NEER basis
PBoC easing suggests a major policy change
CNY policy will refocus on “basically stable” going forward
China’s external surpluses will moderate going forward

HKD

See no reason for any change in the USD 7.75-85 link
Asian currency weakness will eventually weigh on the HKD
Hong Kong is vulnerable to a downturn in external demand
Expect the top end of the band to be tested

KRW

USD-KRW is consolidating after peaking just under 1,500
KRW NEER weakness, lower oil to support C/A going forward
Bank of Korea to cut rates further

TWD

Taiwan’s economy is slowing sharply, rates to be cut further
Trade balance continues to deteriorate on [...]

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