Potential King for 2020
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After successfully smashing GBPAUD for 1500 pips and GBPUSD for 1000 pips this year, we could again see the continuation moves in Sterling pairs. First and foremost, Sterling as a currency that held its significance in the financial market once, has been undervalued to a greater extent. Hence, I still have a bullish bias on Sterling.
Let's dive into the reasons why I have a bullish Bias.
Fundamentals
New Zealand Dollar for 2019
1. Wages: Increased highly in 2019
2. Consumer Price Index: Increased.
3. Inflation: Ticked Down; Inflation Expectation: tracking lower
4. Producer Price Index: Rose higher
5. Foreign Direct Investment: Higher
6. Consumer Confidence: Down
7. Retail Sales: Up
Great Britan Pound
1. Wages: Up
2. Unemployment rate: ticked higher
3. Labor cost: went down
4. Interest rate: stagnant depending on the outcome of Brexit
5. CPI: Down
6. Manufacturing PMI: UP
Above fundamentals are based on the recent data but the data from the UK hardly now matters as the entire investment spectrum is focused on Brexit outcome because the deterioration in the economic data is caused by few radical people within the UK starting with Scottish referendum from September 2014 and that's when GBP started losing its value and since then, we had Brexit in 2016 which can also call it a doomsday for Sterling when it lost more than 20% of its value overnight on June 23.
Why this pair could have a bigger chance of a breakout
1. POTUS just tweeted about getting a US-China trade deal done post-election of 2020 and he also said he is not in a hurry which is negative for antipodean currencies because they are the proxies to Chinese businesses.
2. China in itself is going through a banking crisis https://www.youtube.com/watch?v=Fbe1j5R5sow&feature=youtu.be Save this link & watch later to get an idea. It could be helpful to know something.
3. Apart from this, New Zealand is mostly an export economy and hence, the fundamentals showed an increase in PPI but at the same time inflation is ticking down due to lower currency value
4. Consumer confidence is also a cause for concern when it comes to countries like Australia and New Zealand, as they are high beta currencies and based on consumer sentiment, the central banks of the countries determine their monetary policy going forward where the interest rate is heading lower fro both the antipodean countries.
5. RBNZ in their latest meeting said they are in no rush to lower their interest rates but they will have no option but to lower going forward because the on-ground economy and local businesses are still suffering. The same applies to RBA.
6. On the other hand, Sterling has been ultra-resilient in 2019 by moving back up 1100 pips against USD in a matter of one-quarter of the year.
7. This itself defines/shows what people are actually looking for hen it comes to the value of the currency and on what it is based on.
8. Whole Eurozone is showing a deterioration in the data except France and Germany which has slightly rebounded but not reliable or promising of return in growth. Plus, the new ECB president, Miss. Christine Laggard has been firm on monetary easing policy ( printing more money) and not even showing any signs of budging from negative interest rate policy.
9. Therefore, investors don't have any other option but to have an exposure in Europe via sterling where the interest rate is still positive and BOE in their last meeting hinted if there is a smooth transition in the Brexit then, they are willing to raise their interest rate.
10. This will get interesting now, as RBNZ may either hold or lower where BOE is willing to raise rates. Hence, interest rate differentials along with GDP contribution and fundamentals will support GBP in the coming months.
11. Now, it all depends on the upcoming Brexit Election where fate of the GBP will be decided.
Technically, the price has moved to the bullish bias and buying a breakout of this flag pattern will still fetch 2000 pips in the coming year. Especially, buying more GBP is APril and September will be highly favored due to its seasonality.
Please feel free to drop in any comments or any disagreement. it will be healthy to know the perspective from all sides.
Let's dive into the reasons why I have a bullish Bias.
Fundamentals
New Zealand Dollar for 2019
1. Wages: Increased highly in 2019
2. Consumer Price Index: Increased.
3. Inflation: Ticked Down; Inflation Expectation: tracking lower
4. Producer Price Index: Rose higher
5. Foreign Direct Investment: Higher
6. Consumer Confidence: Down
7. Retail Sales: Up
Great Britan Pound
1. Wages: Up
2. Unemployment rate: ticked higher
3. Labor cost: went down
4. Interest rate: stagnant depending on the outcome of Brexit
5. CPI: Down
6. Manufacturing PMI: UP
Above fundamentals are based on the recent data but the data from the UK hardly now matters as the entire investment spectrum is focused on Brexit outcome because the deterioration in the economic data is caused by few radical people within the UK starting with Scottish referendum from September 2014 and that's when GBP started losing its value and since then, we had Brexit in 2016 which can also call it a doomsday for Sterling when it lost more than 20% of its value overnight on June 23.
Why this pair could have a bigger chance of a breakout
1. POTUS just tweeted about getting a US-China trade deal done post-election of 2020 and he also said he is not in a hurry which is negative for antipodean currencies because they are the proxies to Chinese businesses.
2. China in itself is going through a banking crisis https://www.youtube.com/watch?v=Fbe1j5R5sow&feature=youtu.be Save this link & watch later to get an idea. It could be helpful to know something.
3. Apart from this, New Zealand is mostly an export economy and hence, the fundamentals showed an increase in PPI but at the same time inflation is ticking down due to lower currency value
4. Consumer confidence is also a cause for concern when it comes to countries like Australia and New Zealand, as they are high beta currencies and based on consumer sentiment, the central banks of the countries determine their monetary policy going forward where the interest rate is heading lower fro both the antipodean countries.
5. RBNZ in their latest meeting said they are in no rush to lower their interest rates but they will have no option but to lower going forward because the on-ground economy and local businesses are still suffering. The same applies to RBA.
6. On the other hand, Sterling has been ultra-resilient in 2019 by moving back up 1100 pips against USD in a matter of one-quarter of the year.
7. This itself defines/shows what people are actually looking for hen it comes to the value of the currency and on what it is based on.
8. Whole Eurozone is showing a deterioration in the data except France and Germany which has slightly rebounded but not reliable or promising of return in growth. Plus, the new ECB president, Miss. Christine Laggard has been firm on monetary easing policy ( printing more money) and not even showing any signs of budging from negative interest rate policy.
9. Therefore, investors don't have any other option but to have an exposure in Europe via sterling where the interest rate is still positive and BOE in their last meeting hinted if there is a smooth transition in the Brexit then, they are willing to raise their interest rate.
10. This will get interesting now, as RBNZ may either hold or lower where BOE is willing to raise rates. Hence, interest rate differentials along with GDP contribution and fundamentals will support GBP in the coming months.
11. Now, it all depends on the upcoming Brexit Election where fate of the GBP will be decided.
Technically, the price has moved to the bullish bias and buying a breakout of this flag pattern will still fetch 2000 pips in the coming year. Especially, buying more GBP is APril and September will be highly favored due to its seasonality.
Please feel free to drop in any comments or any disagreement. it will be healthy to know the perspective from all sides.
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Entry on NFP dip @ 1.9985 on 6th December.
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