FOREX WEEKLY. Weekly information issued by the FOREX Advisory Team. Trader view in 2 snapshots. 17 October Global Forex Sentiment

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1 FOREX WEEKLY 17 October 2017 Weekly information issued by the FOREX Advisory Team Global Forex Sentiment The global economy appears remarkably resilient so far to negative (geo)political headlines, given the crisis in Catalonia, Brexit and Japanese elections. In its latest round of forecasts, the IMF points to a broadening and strengthening of growth prospects. Nevertheless, the institution calls for structural reforms to increase potential growth, as the output gap is gradually shrinking. Several themes were apparent in the minutes to the September FOMC meetings. First, both staff and the FOMC see the recent large storms as having only transitory effects on activity with no medium-term implications. Second, the committee seems poised to raise rates a third time this year in December so long as the economy performs as expected. Third, concerns about how to balance recent (dis)inflation signals against buoyant financial market conditions inject uncertainty into the reaction function next year, particularly if there is a change at the helm of the committee. The BoE credit conditions survey points to much tighter supply for household credit over the coming quarter, particularly for unsecured debt. In Japan, The BoJ s Sakura report on regional economies also highlighted improvements in consumption. In the report, four of nine regions revised their overall assessments upward, noting improvements especially in the areas of public investment and production. The MAS kept policy unchanged, but opened room for a policy change. Some analysts expect the MAS to adopt an appreciating SGD NEER band in April The latest CPI report in Brazil surprised on the upside, at 0.16% m/m during September. Market prices printed at 0.13% m/m and were the main driver, as the drop in food prices was smaller than expected. On the other hand, regulated prices stabilized and printed 0.24% m/m, amid a decline in electrical tariffs and deceleration on gasoline prices. Trader view in 2 snapshots GBP USD Full view: page 2 EUR CAD Full view: page 3 UK CPI - the highest level since 2012! Buy a Put GBPUSD x KI BOC under the spot (25/10/2017)! Build a Short EUR vs CAD Position. A publication of the FOREX Advisory Team Banque SYZ SA Tel. +41 (0) fxtrading@syzgroup.com Contacts: José-Manuel Luna Pier-Luigi Bonelli Ugo Biancaniello Table of contents (click on hyperlinks) Trader view Bloomberg FX Forecasts... 4 IMM Positioning... 4 Global Market Focus... 5 Disclaimer at the end of the document.

2 TRADER VIEW: GBP USD: UK CPI - the highest level since Trading Idea & Hedging Solution In a short term view, the GBP/USD remains in a bullish trend. However, this channel should break in the downside. That is why we recommend you this strategy: Spot ref Buy a Put GBPUSD strike with KI at expiry 3 months (17 January 2018) Price: 0.76% GBP or usd pips Breakeven: Support II Support I Spot Resistance I Resistance II Technical The GBP/USD has to break the first support at to open the way to the downside. Higher, is the first resistance before the main one at Market Update UK CPI inflation rose by 0.1ppt in September, to 3.0% y-o-y, the highest since April The core CPI rate was unchanged at 2.7% y-o-y, so was the RPI rate at 3.9% y-o-y. The CPI and core CPI rates both came out in line with consensus, but the RPI rate was 0.1ppt below. CPIH inflation came in at 2.8% y-o-y, 0.1ppt higher than September. The weakness relative to headline CPI reflects Owner Occupier Housing (OOH) inflation, which currently stands at 1.9% y-o-y September's inflation pick-up was driven by various components, including a 2.1% m-o-m rise in fuel prices, a pickup in food inflation (up to 3.0% y-o-y in September from 2.1% in August) and a rise in recreation and cultural goods, with particularly high computer games inflation. Meanwhile, there was a negative contribution from clothing prices, which rose by less this September than the previous September. And the ONS has pointed out that a 12.5% increase in British Gas electricity prices was not captured in the September data, so is likely to come through in October. Page 2

3 TRADER VIEW: EUR CAD : BOC under the spot (25/10/2017)! Trading Idea & Hedging Solution After having touched its lowest level in September at , the EUR/CAD traded higher. Now the spot is around Even if there is still potential to trade to , we think it is a good opportunity to build a short EUR vs CAD Position in a short term view. Here our strategy (spot ref ) : Sell ½ EUR vs CAD at Sell ½ EUR vs CAD at Place the following orders to buy EUR/CAD: Stop Loss at (-2.0%) Take Profit at (+3.4%) Support II Support I Spot Resistance I Resistance II Technical The EUR/CAD trades around the upside of the Bollinger. The first resistance is at and a break of this level will open the way to the second one at In the downside, and are the first supports; representing the 200 SMAVG. Market Update CAD has been under dual pressure from fading BoC expectations and rising NAFTA risks. The BoC s Q3 business outlook survey pointed to an overall positive outlook for activity but some moderation across a number of indicators including sales, investment and employment. Capacity pressures, labor shortage indicators and inflation expectations have all moved up slightly. The fourth round of NAFTA negotiations ends of Tuesday and while more details will be available at the pressconference, it appears that talks have hit some roadblocks. The US put two key demands on the table. First, in auto trade, US content must amount to at least 50% to qualify for duty free shipment with the overall North American content raised to 85% (from 62.5% currently). Second the US wants to be able to opt out of the Chapter 11 dispute resolution panels (where corporates can challenge governments' trade policy). We still suspect that NAFTA will survive especially as it's not clear if the US President has the authority to terminate the agreement without Congress. However risks appear to be on the rise and this should at least make the BoC somewhat more cautious about tightening rates further. Page 3

4 SYZ ANALYSTS FORECASTS Ccy Pairs 6M 1Y EUR/USD GBP/USD USD/JPY USD/CHF USD/CAD AUD/USD EUR/JPY EUR/GBP USD/CNY USD/ZAR USD/TRY USD/MXN USD/BRL USD/RUB BLOOMBERG FX FORECASTS October Maturity EURUSD EURCHF USDCHF Q Q Q Maturity EURJPY USDJPY AUDUSD Q Q Q Maturity EURGBP GBPUSD USDCAD Q Q Q2 months IMM POSITIONING December 2017 Contract size Position Non-commercial Commercial Last Actual Last Actual EUR 100K JPY 12'500K CHF 125K GBP 62.5K AUD 100K CAD 100K Short 96'220 97' ' '104 Long 187' ' ' '660 Net 90'833 98' ' '444 Short 143' '074 53'797 49'943 Long 58'770 51' ' '289 Net -84' ' ' '346 Short 20'907 22'473 5'938 5'744 Long 17'614 18'211 17'459 21'075 Net -3'293-4'262 11'521 15'331 Short 60'376 64'102 78'951 80'641 Long 80'325 79'610 47'590 60'706 Net 19'949 15'508-31'361-19'935 Short 26'687 24'520 96'957 91'755 Long 98'499 93'702 14'774 12'358 Net 71'812 69'182-82'183-79'397 Short 22'076 20' ' '611 Long 97'204 97'068 35'298 33'076 Net 75'128 76'392-97'056-97'535 Page 4

5 GLOBAL MARKET FOCUS China Trade Data September trade data came in stronger than previous month. Import growth beat market expectation (bbg: 14.7% y- o-y) once again in the month, and is now running at high teens (18.7% y-o-y). Last month's import growth number was also revised up by two tenths to 13.5% y-o-y. In terms of rising commodity prices, signs of this were exhibited in the recent PMI surveys, enterprises were reporting much higher input costs than before. Also, the CRB index - a proxy for raw material price change - rose further in September at a rate of 12.5% y-o-y, although the acceleration in annual price growth of Brent oil was due partly to the low base of last year. In addition, the rise of input prices was reflected in today's import growth data too, with import value growth outpacing their volume changes, just to name a few: iron ore (value 30.2% versus volume: 10.6%), copper (37.9% vs 5.8%), crude oil (29.4% vs 11.9%), natural gas (25.5% vs 3.7%). Turning to exports, value growth rebounded in September. At 8.1% y-o-y, the recovery is due in part to the lower base of last year, and partly to recovering global demand for Chinese goods. The geographical breakdown showed that export growth has accelerated across the board, China exports to ASEAN jumped to 10.8% y-o-y, up from 6.0% previously, the exports to the US - the largest export market of China (~19% of China's total exports)- also rose to 13.8% y-o-y from 8.4% previously, while export growth to the EU also doubled in September (10.4% y-o-y). The exception was Japan: China's export to this close neighbor has ground to a halt in September. The NBS said in the conference that the recovery in global trade activity is continuing, with the Baltic Dry index, which captures the demand for shipping capacity vs supply, hitting the highest level since DISCLAIMER This document is for distribution to professional or institutional clients or counterparties only and is not intended for distribution to or use by, retail customers or any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where the distribution, publication, availability or use of such document would be contrary to law or regulation. This publication is for information only and does not constitute a contractual document, an offer, or a solicitation of an offer, to buy or sell any investment or other financial product. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. Any opinion is valid only as of the date of this publication and may be changed at any time without prior warning. Past performance is not an indication of future results. All information and opinions expressed in this document were obtained from sources believed to be reliable and in good faith, but no representation or warranty, express or implied, is made as to its accuracy or completeness. Banque SYZ SA disclaims liability for any and all forms of loss or damage arising out of the use of them. Before any investment, the recipient of this document has to consult with your own legal, financial and/or tax adviser. This document may not be reproduced or distributed, either in part or in full, without the prior authorisation of Banque SYZ SA. These opinions reflect the short term views of the FOREX TRADING team and can differ from the long term investment policy of Banque SYZ SA. Page 5