Founder

Olivier Desbarres

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4X Global Research

4X Global Research was founded in 2017 to provide institutional and corporate clients with the substantive research, high-quality analysis and thoughtful insight on Emerging and G20 economies and financial markets they need to make informed and timely decisions and gain an edge in their investments.

FX & Rates

This report updates the monthly seasonal patterns of 31 major Nominal Effective Exchange Rates(NEERs) going back to January 2010, using over two million daily data points with trade-weights derived from the<a href="https://www.bis.org/statistics/eer.htm" target="_blank" rel="noopener"> BIS</a> (April 2019) and national central banks (see <a href="https://gallery.mailchimp.com/948838a86ce72ab6d8019a39d/files/15f4d8a9-56a4-46fd-9d78-607e5fd523e6/4X_Global_Research_Nominal_Effective_Exchange_Rates_Monthly_seasonal_patterns.pdf" target="_blank" rel="noopener">Nominal Effective Exchange Rates: Monthly seasonal patterns</a>, 10 January 2019). A number of factors can drive currency seasonality, including underlying seasonal patterns in balance of payment flows, the timing of public holidays and market liquidity. However, significant changes in central bank or government policy, major domestic events (e.g. Brexit) and once-in-a-lifetime “black swan” events such as the Covid-19 pandemic January can break down even well established seasonal currency patterns. In emerging Asia interventionist central banks have in part eroded monthly currency seasonality.Unsurprisingly, typical monthly seasonal currency patterns broke down in 2020, with a few exceptions. In particular, when global risk sentiment collapsed in March and peaked in June only a handful of currencies moved broadly in line with their historical patterns. Historical seasonal patterns somewhat re-established themselves in Q3 (notably August) with domestic factors once again driving asset prices, including currencies. But the resurgence in Covid-19 cases and deaths in Q4 along with the re-imposition of national lockdowns once again contributed to a breakdown in historical seasonal patterns, albeit not as marked as in March or June.The Brazilian Real and Colombian Peso NEERs recorded the strongest average rates of appreciation in the month of January in 2010-2019, while the Turkish Lira and Russian Rouble were the weakest. About 15 NEERs traded broadly in line with their historical patterns in January 2020.However, the Covid-19 pandemic was still in its infancy and its impact on global economies and financial markets still modest. The risk is that many currencies, including the typically strong Swiss Franc, may in January 2021 continue to deviate materially from their 2010-2019 seasonal patterns in our view.

This report updates the monthly seasonal patterns of 31 major Nominal Effective Exchange Rates(NEERs) going back to January 2010, using over two million daily data points with trade-weights derived from the BIS (April 2019) and national central banks (see Nominal Effective Exchange Rates: Monthly seasonal patterns, 10 January 2019). A number of factors can drive currency seasonality, including underlying seasonal patterns in balance of payment flows, the timing of public holidays and market liquidity. However, significant changes in central bank or government policy, major domestic events (e.g. Brexit) and once-in-a-lifetime “black swan” events such as the Covid-19 pandemic January can break down even well established seasonal currency patterns. In emerging Asia interventionist central banks have in part eroded monthly currency seasonality.Unsurprisingly, typical monthly seasonal currency patterns broke down in 2020, with a few exceptions. In particular, when global risk sentiment collapsed in March and peaked in June only a handful of currencies moved broadly in line with their historical patterns. Historical seasonal patterns somewhat re-established themselves in Q3 (notably August) with domestic factors once again driving asset prices, including currencies. But the resurgence in Covid-19 cases and deaths in Q4 along with the re-imposition of national lockdowns once again contributed to a breakdown in historical seasonal patterns, albeit not as marked as in March or June.The Brazilian Real and Colombian Peso NEERs recorded the strongest average rates of appreciation in the month of January in 2010-2019, while the Turkish Lira and Russian Rouble were the weakest. About 15 NEERs traded broadly in line with their historical patterns in January 2020.However, the Covid-19 pandemic was still in its infancy and its impact on global economies and financial markets still modest. The risk is that many currencies, including the typically strong Swiss Franc, may in January 2021 continue to deviate materially from their 2010-2019 seasonal patterns in our view.

Monthly Currency Seasonality: Down and Out?

The United States’ post-war record GDP contraction in Q2 of 9.5% qoq and the Dollar’s recent depreciation have been making headline news but some perspective is required.The US GDP contracted about 10.6% in H1 2020, far more than in China (+0.6%) and South Korea (-4.6%). However, of other economies which have so far released Q2 data – including the Eurozone’s four largest economies, Mexico and Singapore – all posted larger rates of contractions in H1 2020. The UK’s GDP likely shrunk more than twice as much whilst France (-19.0%) and Mexico (-18.3%) only fared only marginally better. Moreover, GDP in the US outperformed in H1 2020 despite GDP growth in 2019 (+2.4%) being materially stronger than in Mexico (-0.1%), Italy (+0.3%), Germany (+0.6%), Singapore (+0.7%), the United Kingdom (+1.5%), France (+1.5%) and Spain (+2.0%). How major economies will perform in Q3 in the context of a rise in the number of local or national covid-19 cases and some countries having (partially) frozen or re-tightened national lockdowns is up for debate. The outlook for Q4, which for Western countries will mean colder weather and a potential increase in covid-19 cases, is even more uncertain.The Dollar’s depreciation in the past six weeks from a strong level is mainly due to successful central bank policies to address imbalances in its supply and demand and a cyclical rotation out of Dollars into other FX reserve currencies, including the Euro. As a result, the share of Dollars in the world’s central bank FX reserves, which has hovered around 62% in the past two years, may have fallen slightly in recent months while the share of Euros (20%), Sterling (4.4%) and Swiss Franc (0.15%) may have increased marginally.However, we do not think that FX price action in the past couple of months, including the Euro’s appreciation to multi-year highs, points to the beginning of a structural and permanent shift in the currency composition of central banks’ FX reserves. In the same way that apocalyptic forecasts in the past about the Eurozone and Euro have failed to materialise, current forecasts of the Dollar’s demise as the world’s number one reserve currency are at best extremely premature, at worst unfounded in our view.

The United States’ post-war record GDP contraction in Q2 of 9.5% qoq and the Dollar’s recent depreciation have been making headline news but some perspective is required.The US GDP contracted about 10.6% in H1 2020, far more than in China (+0.6%) and South Korea (-4.6%). However, of other economies which have so far released Q2 data – including the Eurozone’s four largest economies, Mexico and Singapore – all posted larger rates of contractions in H1 2020. The UK’s GDP likely shrunk more than twice as much whilst France (-19.0%) and Mexico (-18.3%) only fared only marginally better. Moreover, GDP in the US outperformed in H1 2020 despite GDP growth in 2019 (+2.4%) being materially stronger than in Mexico (-0.1%), Italy (+0.3%), Germany (+0.6%), Singapore (+0.7%), the United Kingdom (+1.5%), France (+1.5%) and Spain (+2.0%). How major economies will perform in Q3 in the context of a rise in the number of local or national covid-19 cases and some countries having (partially) frozen or re-tightened national lockdowns is up for debate. The outlook for Q4, which for Western countries will mean colder weather and a potential increase in covid-19 cases, is even more uncertain.The Dollar’s depreciation in the past six weeks from a strong level is mainly due to successful central bank policies to address imbalances in its supply and demand and a cyclical rotation out of Dollars into other FX reserve currencies, including the Euro. As a result, the share of Dollars in the world’s central bank FX reserves, which has hovered around 62% in the past two years, may have fallen slightly in recent months while the share of Euros (20%), Sterling (4.4%) and Swiss Franc (0.15%) may have increased marginally.However, we do not think that FX price action in the past couple of months, including the Euro’s appreciation to multi-year highs, points to the beginning of a structural and permanent shift in the currency composition of central banks’ FX reserves. In the same way that apocalyptic forecasts in the past about the Eurozone and Euro have failed to materialise, current forecasts of the Dollar’s demise as the world’s number one reserve currency are at best extremely premature, at worst unfounded in our view.

Warnings About US Economy and Dollar Overblown

Price action in major currencies was again subdued last week. With few tier-one macro data releases for markets to trade off the focus was on the reaction function of governments and central banks to covid-19 related developments.Only a handful of currencies appreciated by more than 1% vs the Dollar last week and no major currency depreciated by more than 0.7%. The net result was that the Dollar Nominal Effective Exchange Rate was down only 0.2% and it is broadly unchanged since Friday.The calendar for tier-one macro data releases and policy events is far heavier this week, particularly in the US, China and UK. OPEC+ is also due to meet on 15th July with expectations that it will announce plans to start increasing oil production.Since its rally in mid-June the Dollar has arguably been trading like a “safe-haven” again, with stronger-than-expected US macro data still mostly benefiting US and global equities. In this context this week’s release of June retail sales figures and NY and Philly Fed manufacturing indices for July will be in markets’ eye-sight.The Sterling NEER is near a one-month high as the British government once again opens the spending taps but UK GDP, inflation, labour market and retail sales data out this week may well put a floor under reasonably high currency volatility.In the Eurozone, macro data are likely to continue to play second fiddle to pan-European policy stimulus measures, with the Euro likely to be sensitive to this Thursday’s ECB policy meeting and in particular the <a href="https://www.consilium.europa.eu/en/meetings/european-council/2020/07/17-18/" target="_blank" rel="noopener">special EU Summit</a> on 17-18 July.The Chinese Renminbi has appreciated a slow but steady 1.7% in the past month but has treaded water in the past four sessions. This week’s sequential June data and Q2 GDP figures could prove a litmus test for the PBoC’s appetite for further currency appreciation.The Australian and New Zealand Dollars are struggling for clear direction but that is not the case of the Thai Baht which, in line with our expectations, has been weakening in July.

Price action in major currencies was again subdued last week. With few tier-one macro data releases for markets to trade off the focus was on the reaction function of governments and central banks to covid-19 related developments.Only a handful of currencies appreciated by more than 1% vs the Dollar last week and no major currency depreciated by more than 0.7%. The net result was that the Dollar Nominal Effective Exchange Rate was down only 0.2% and it is broadly unchanged since Friday.The calendar for tier-one macro data releases and policy events is far heavier this week, particularly in the US, China and UK. OPEC+ is also due to meet on 15th July with expectations that it will announce plans to start increasing oil production.Since its rally in mid-June the Dollar has arguably been trading like a “safe-haven” again, with stronger-than-expected US macro data still mostly benefiting US and global equities. In this context this week’s release of June retail sales figures and NY and Philly Fed manufacturing indices for July will be in markets’ eye-sight.The Sterling NEER is near a one-month high as the British government once again opens the spending taps but UK GDP, inflation, labour market and retail sales data out this week may well put a floor under reasonably high currency volatility.In the Eurozone, macro data are likely to continue to play second fiddle to pan-European policy stimulus measures, with the Euro likely to be sensitive to this Thursday’s ECB policy meeting and in particular the special EU Summit on 17-18 July.The Chinese Renminbi has appreciated a slow but steady 1.7% in the past month but has treaded water in the past four sessions. This week’s sequential June data and Q2 GDP figures could prove a litmus test for the PBoC’s appetite for further currency appreciation.The Australian and New Zealand Dollars are struggling for clear direction but that is not the case of the Thai Baht which, in line with our expectations, has been weakening in July.

Major Economies & Currencies – What to Look Out for and Why It Matters

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

<a href="https://www.smartkarma.com/entities/u-s-dollar-index-usdx" target="_blank" data-smartkarma-citation="entities:26018:1" rel="noopener">Dollar Index (DXY) (DXY CURNCY)</a> sell strength near 98.00-50 in line with the Euro near 1.1120 (between 1.12 and 1.1120). Macro conviction is to sell near 98.50-99 for a decline to 95.10 with 94 attracting. Rising wedge support crack is in focus.Sell rally attempts in July but by late July the dollar will form a better tactical or intermediate low.Short USD bets remains in Sterling (short from 1.28) and USD/JPY from 109 area and at USD/KRW base. USD/IDR and USD/THB are moving into oversold cycle lows. <div>
<div>USD now rolling over in EM. In Asia the SGD (bear triangle) and INR are gaining downside traction while the IDR and THB have bounced from oversold levels. MYR bear wedge breaking lower. Solid USD downtrends remain intact in PHP and TWD.</div>
<div></div>
<div>USD/CNH bet is for a bounce from sub 7.0 to 7.05 then down to 6.95 to base.</div>
</div>

Dollar Index (DXY) (DXY CURNCY) sell strength near 98.00-50 in line with the Euro near 1.1120 (between 1.12 and 1.1120). Macro conviction is to sell near 98.50-99 for a decline to 95.10 with 94 attracting. Rising wedge support crack is in focus.Sell rally attempts in July but by late July the dollar will form a better tactical or intermediate low.Short USD bets remains in Sterling (short from 1.28) and USD/JPY from 109 area and at USD/KRW base. USD/IDR and USD/THB are moving into oversold cycle lows. 
USD now rolling over in EM. In Asia the SGD (bear triangle) and INR are gaining downside traction while the IDR and THB have bounced from oversold levels. MYR bear wedge breaking lower. Solid USD downtrends remain intact in PHP and TWD.

USD/CNH bet is for a bounce from sub 7.0 to 7.05 then down to 6.95 to base.


Major currencies, equity markets and the price of crude oil since 8th June – the cycle low in the US Dollar – have exhibited reasonably limited directionality, narrow trading ranges and very low volatility, with the notable exception of currencies in Central and Latin America.However this is not a case of more confident financial market participants finding their feet, in our view. Rather it is a reflexion of greater global risk aversion, with financial markets unable to see through the smoke and reluctant to pit themselves against their peers and test monetary authorities’ resolve at a time of still acute uncertainty on many levels.

Major currencies, equity markets and the price of crude oil since 8th June – the cycle low in the US Dollar – have exhibited reasonably limited directionality, narrow trading ranges and very low volatility, with the notable exception of currencies in Central and Latin America.However this is not a case of more confident financial market participants finding their feet, in our view. Rather it is a reflexion of greater global risk aversion, with financial markets unable to see through the smoke and reluctant to pit themselves against their peers and test monetary authorities’ resolve at a time of still acute uncertainty on many levels.

Risk Aversion, Not Panic, in Face of Uncertainty

Australia

The Australian dollar is the official currency of the Commonwealth of Australia.

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AUD (USDAUD CURNCY)

Monthly Currency Seasonality: Down and Out?

Covid-19 pandemic and national lockdowns in 2020 wreaked havoc with historical monthly seasonal patterns for developed and EM currencies. But what...

Olivier Desbarres

Warnings About US Economy and Dollar Overblown

The United States’ post-war record GDP contraction in Q2 of 9.5% qoq and the Dollar’s recent depreciation have been making headline news but some...

Olivier Desbarres

Major Economies & Currencies – What to Look Out for and Why It Matters

Price action in major currencies was again subdued last week. With few tier-one macro data releases for markets to trade off the focus was on the...

Olivier Desbarres

Sell USD Rally Attempts

Dollar Index (DXY) (DXY CURNCY) sell strength near 98.00-50 in line with the Euro near 1.1120 (between 1.12 and 1.1120). Macro conviction is to...

Thomas Schroeder

Risk Aversion, Not Panic, in Face of Uncertainty

Major currencies, equity markets and the price of crude oil since 8th June – the cycle low in the US Dollar – have exhibited reasonably limited...

Olivier Desbarres

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)