FOREX WEEKLY. Weekly information issued by the FOREX Advisory Team. Trader view in 2 snapshots. 21 September Global Forex Sentiment

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FOREX WEEKLY 21 September 2017 Weekly information issued by the FOREX Advisory Team Global Forex Sentiment China - S&P just dinged the sovereign rating. Banks have been marked down too.

State control and plentiful savings mean Beijing will escape most of the usual fallout.

momentum. Elections are due to be held on 23 September (Saturday), with results expected shortly after polls close at 7pm local time.

1 FOREX WEEKLY 21 September 2017 Weekly information issued by the FOREX Advisory Team Global Forex Sentiment China - S&P just dinged the sovereign rating. Banks have been marked down too. Worries about rising debt are justified, but the market s non-reaction shows how differently China s economy is wired. State control and plentiful savings mean Beijing will escape most of the usual fallout. In New Zealand, the latest and final set of NZ election opinion polls has shown a last minute increase in support for the incumbent National Party and some moderation in the opposition Labour party s momentum. Elections are due to be held on 23 September (Saturday), with results expected shortly after polls close at 7pm local time. Most results can be expected by midnight on Saturday, which should provide clarity on the shape of the next government. Brazil - Sep mid-month inflation (IPCA-15) came in below expectations once again at 0.11% m-o-m against consensus of 0.13%. In 12m, prices rose 2.56% y-o-y, the lowest rate since 1Q1999, at the beginning of the inflation target regime. Falling food prices (-1.5% m-o-m and -5.4% y-o-y) drove headline inflation lower, but from any perspective, prices are behaving well. Industrialized market product prices excluding food rose only 1.4% y-o-y. The BRL remains under heavy pressure against the USD no matter how colorful the positive carry is. Mexico s retail sales came in slightly stronger than consensus expected, increasing 0.3 m/m in seasonally adjusted terms during July. This was led by positive performance in apparel, paper and entertainment, healthcare, and hardware sales, offset by strong declines in internet and vehicle sales and a slight drop in domestic equipment. In annual terms, the original series maintained its rate of growth at 0.4% y/y. During July, industrial production fell 1.0% m/m sa. That drop could be compensated by soft performance from the services sector, as the report from retail sales suggests. Trader view in 2 snapshots EUR USD Full view: page 2 AUD CHF Full view: page 3 It is High Time for a short term correction! Another Kangaroo Jump! Sell EUR vs USD with a Protective EUR Call Buy Forward 6 months AUD vs CHF on dips 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: EUR USD: It is High Time for a short term correction! Sell EUR vs USD with a Protective EUR Call Trading Idea & Hedging Solution We keep our long term bullish view on the EURUSD with upside objectives at and However, in the very short term we believe that the EUR could correct lower towards and We therefore would recommend the following bearish strategy, Spot Ref : Sell Forward 1 mth EUR vs USD at actual spot level (Forward price is ) Objectives and Buy a protective EUR Call Strike expiry 1 month Premium = 0.60% of the EUR Max loss = 1.27% & Potential Profit 4.09% Support II Support I Spot Resist ance I Resist ance II Technical The EUR/USD has confirmed finishing its wave V of C and initiated a major up move towards and posting a high at Downside Short term correction are expected with key support at and Market Update The FED has announced last night that it will diminish Assets and will soon begin reversing the asset purchases it made during and after the financial crisis. From October, America s central bank will stop reinvesting all of the money it receives when its assets start to mature. As a result, its $4.5trn balance-sheet will gradually shrink. However, the Fed did not give any clues as to what the endpoint for the balance-sheet should be. This is an important question. There are strong arguments for keeping the balance-sheet large. In fact, it might be better were the Fed not shedding any assets at all. There was little in the statement or press conference to suggest that concerns about inflation have permeated the Fed's view at this stage; we are left to conclude the committee sees the recent disinflation as far more transitory than not. Participants upgraded growth in 2017, marked down the unemployment rate path, and 12 of 16 participants believe one or more rate hikes this year remains appropriate. In Germany, polls suggest that the next government will likely take the form of a Grand Coalition. The latest polls suggest that the CDU/CSU will take 36% of the vote, while the SPD will take 23%. The FDP, the Linke, the Greens and the AFD will likely receive 10%, 9%, 8% and 10% respectively. The EUR is reflecting a lot of positive news at this stage and we prefer investing short in the EUR but only for a downside correction. Page 2

3 TRADER VIEW: AUD CHF : Another Kangaroo Jump! Buy Forward 6 months AUD vs CHF on dips Trading Idea & Hedging Solution Australian fundamentals keep pointing to the positive direction and China is showing recovery signs. We believe that the CHF is starting to show some weakening signs on a medium to long term and would like to start buying AUD on weakness for a major move up towards and We recommend the following investment idea, Spot Ref : Buy ½ position in AUD vs CHF Forward 6 months at Spot & Fwd ( fwd points) Buy the other ½ position Forward 6 months at Spot & Fwd ( fwd points) Place a stop loss for the whole position at Potential Loss 3.13% AUD Nominal Potential Profit 16.35% AUD Nominal Support II Support I Spot Resist ance I Resist ance II Technical A major A-B-C upward correction is on its way. Key resistances are found at and A weekly close below would terminate our bullish AUD scenario. First key supports are found at and Market Update The Reserve Bank of Australia may leave the cash rate target unchanged at 1.5% this year. The RBA expects 3% growth over the next few years, and is counting on stronger exports and investment to support the economy. Labor market indicators suggest stronger consumption in 3Q, which may spill over into 4Q. At the same time, lower oil prices and a stronger Aussie helped push inflation back below the central bank's 2-3% target range in 2Q. Australia's significantly stronger employment momentum in March through May likely lifted growth in 2Q. Yet if exports falter in 2H, so too may hiring -- a pattern that has repeated in the past. In the readings for May, Australia's unemployment rate fell by 0.2 ppt to 5.5%, the lowest since Hiring momentum on a 12-month rolling basis continued to improve, generating nearly 233,000 new jobs in the year to May, with 64% of the increase in full-time work. The second half of 2017 may be a different story as China's deleveraging progresses. Increases in commodity prices have already started to slow. This suggests Australia's exports may not be as strong in subsequent quarters, especially as favorable base effects fade in 2H. 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 Sept ember Mat urit y EURUSD EURCHF USDCHF Q Q Q Mat urit y EURJPY USDJPY AUDUSD Q Q Q Mat urit y EURGBP GBPUSD USDCAD Q Q Q IMM POSITIONING Sept ember 2017 Cont ract size Posit ion Non-commercial Commercial Last Act ual Last Act ual EUR 100K JPY 12'500K CHF 125K GBP 62.5K AUD 100K CAD 100K Short 98' ' ' '785 Long 194' ' ' '600 Net 96'309 86' ' '185 Short 120'230 97'939 58'205 59'890 Long 47'285 40' ' '392 Net -72'945-57'297 78'232 67'502 Short 14'063 14'870 10'961 11'662 Long 11'892 13'556 16'668 16'870 Net -2'171-1'314 5'707 5'208 Short 107' '023 72' '335 Long 54'454 68' ' '804 Net -52'927-46'085 52'245 44'469 Short 38'449 38' ' '192 Long 103' '713 22'559 31'939 Net 64'904 63'033-83'189-83'253 Short 41'088 41' ' '389 Long 94'732 91'645 62'321 78'318 Net 53'644 50'499-71'350-74'071 Page 4

5 GLOBAL MARKET FOCUS Are Bonds transmitting a positive sign for the market? The stock market s positive mood has managed to survive the high stress over North Korea's nuclear program. In part, this is because investors believe that global economic growth and corporate profits will continue to do well. One reassuring signal is from the corporate bond market. The global default rate on speculative (junk) bonds has been dropping; fewer companies are going bust. This is the first time the default rate has dropped below 3% since October 2015 when a sudden fall in the oil price caused cashflow problems for the energy sector, particularly in the US. Moody's, a rating agency, thinks the trend will continue, with defaults falling to 2.6% by the end of the year and 2.3% in 12 months' time. The excess interest rate paid by speculative borrowers has dropped back after a spike in Spreads are not as low as they were in 2007 (the height of the credit boom). But given that government bond yields are very low, the total cost of borrowing in nominal terms is extremely subdued by historical standards. That has made it easier and cheaper for companies to refinance themselves, and thus makes a short-term spike in defaults less likely. What could spoil the party? Central banks might tighten monetary policy too quickly and push economies into recession. The previous post showed that the rate of growth of credit has slowed sharply, a bad omen. But these figures show the squeeze is yet to show up in the corporate bond market. Page 5

6 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 6

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

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