Founder

Olivier Desbarres

Exacting. Excellent. Exceeding. Exemplary.

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?

Media coverage of Emerging Market currencies tends to oscillate between the very bearish and very bullish, with little differentiation between low and high-yielding currencies or between regional blocks let alone between the dozens of currencies still referred to, rightly or wrongly, as “emerging”. Price action in 2019 only partially vindicates this approach.News articles about the November EM currency rally and the long list of factors supporting further outperformance next year have been rife.EM currencies, particularly high-yielders, materially outperformed in the fortnight following the US elections thanks in part to a pick-up in portfolio inflows. The prevailing view was/is that a less conflictual Biden presidency will be a net positive for global trade and commodity prices. EM currencies appreciated further following news on 23rd November that the more affordable Astra Zeneca vaccine was up to 90% effective and Trump’s announcement that he would allow the transition of power to President-elect Biden.However, in the past two weeks a GDP-weighted basket of EM currencies (excluding the Chinese Renminbi) has appreciated only 0.9% versus the Dollar and underperformed a basket of developed market currencies (+1.3%). Moreover, high yielding EM currencies (+1.1%) have only marginally outperformed low-yielding EM currencies (+0.7%). Domestic and regional factors over-and-above “global risk appetite” have arguably contributed to the outperformance of Central European and Latam currencies and the more mixed (read subdued) performance of high-yielding EM and Asian currencies. One explanation is that some of these EM currencies are already pricing in a lot of “good” news.The consensus forecast is seemingly that EM currencies will outperform both the Dollar and developed market currencies going forward. The long list of supporting factors includes i) cheap EM valuations, ii) EM currencies’ yield advantage, iii) the benefits to EM of further Dollar depreciation and iv) a rebound in global economic growth. We sympathise with this view, albeit with some important caveats. One is that more interventionist Asian central banks may stop their currencies from fully joining any EM currency party in 2021. Moreover, we would split the next 13 months into three timelines.

Media coverage of Emerging Market currencies tends to oscillate between the very bearish and very bullish, with little differentiation between low and high-yielding currencies or between regional blocks let alone between the dozens of currencies still referred to, rightly or wrongly, as “emerging”. Price action in 2019 only partially vindicates this approach.News articles about the November EM currency rally and the long list of factors supporting further outperformance next year have been rife.EM currencies, particularly high-yielders, materially outperformed in the fortnight following the US elections thanks in part to a pick-up in portfolio inflows. The prevailing view was/is that a less conflictual Biden presidency will be a net positive for global trade and commodity prices. EM currencies appreciated further following news on 23rd November that the more affordable Astra Zeneca vaccine was up to 90% effective and Trump’s announcement that he would allow the transition of power to President-elect Biden.However, in the past two weeks a GDP-weighted basket of EM currencies (excluding the Chinese Renminbi) has appreciated only 0.9% versus the Dollar and underperformed a basket of developed market currencies (+1.3%). Moreover, high yielding EM currencies (+1.1%) have only marginally outperformed low-yielding EM currencies (+0.7%). Domestic and regional factors over-and-above “global risk appetite” have arguably contributed to the outperformance of Central European and Latam currencies and the more mixed (read subdued) performance of high-yielding EM and Asian currencies. One explanation is that some of these EM currencies are already pricing in a lot of “good” news.The consensus forecast is seemingly that EM currencies will outperform both the Dollar and developed market currencies going forward. The long list of supporting factors includes i) cheap EM valuations, ii) EM currencies’ yield advantage, iii) the benefits to EM of further Dollar depreciation and iv) a rebound in global economic growth. We sympathise with this view, albeit with some important caveats. One is that more interventionist Asian central banks may stop their currencies from fully joining any EM currency party in 2021. Moreover, we would split the next 13 months into three timelines.

Emerging Market Currencies: Hopes and Realities

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 CURNCY)</a> is ripe for a squeeze higher given elevated short positioning and signs of downside exhaustion in the form of a descending bull wedge associated with cycle lows. Positioning risk with the market short and risk of an upside surprise tied to risk aversion is now growing.DXY – Call was to buy the DXY near the 92.00/91.60 low zone as the bullish wedge matures. 93.50 and 94, the resistance to clear to reach for 95.00 with risk to 95.80. RSI new point of bull divergence stands out and has now cleared trendline resistance that will lead a DXY price break higher above 93.50. Tactical bottoming bias for the USD into oversold readings with consensus USD bearish. <div>
<div>Tactical: Bullish.</div>
<div>Macro: Remains bearish to sell a bounce sequence.</div>
<div>Conviction: USD rally on bull wedge patterns with divergence likely to surprise to the upside given USD bear positioning.</div>
</div>

Dollar Index (DXY CURNCY) is ripe for a squeeze higher given elevated short positioning and signs of downside exhaustion in the form of a descending bull wedge associated with cycle lows. Positioning risk with the market short and risk of an upside surprise tied to risk aversion is now growing.DXY – Call was to buy the DXY near the 92.00/91.60 low zone as the bullish wedge matures. 93.50 and 94, the resistance to clear to reach for 95.00 with risk to 95.80. RSI new point of bull divergence stands out and has now cleared trendline resistance that will lead a DXY price break higher above 93.50. Tactical bottoming bias for the USD into oversold readings with consensus USD bearish. 
Tactical: Bullish.
Macro: Remains bearish to sell a bounce sequence.
Conviction: USD rally on bull wedge patterns with divergence likely to surprise to the upside given USD bear positioning.


Trading a USD Short Squeeze, Then Re Short

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

Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

Thematic (Sector/Industry)

<ul><li>The Covid-19 pandemic is driving customer to change behaviour, and is accelerating and deepening the shift to digital banking and financial services, which presents hurdles for incumbents and mainly opportunities for FinTechs</li></ul><ul><li>
<a href="https://www.smartkarma.com/entities/banco-inter-sa" target="_blank" data-smartkarma-citation="entities:28162:1" rel="noopener">Banco Inter SA (BIDI11 BZ)</a>  is our preferred name on growth potential, solidity of capital base and steady customer growth; it offers premium growth prospects and trades on an attractive PEG</li></ul><ul><li>In the Brazil digital banking space, the leader, Nubank, remains privately owned, and it does not yet appear to have IPO plans</li></ul><ul><li>
<a href="https://www.smartkarma.com/entities/banco-pan-sa" target="_blank" data-smartkarma-citation="entities:28163:1" rel="noopener">Banco Pan SA (BPAN4 BZ)</a> is one to watch in the low-income space; it is transitioning from a low-income focused traditional to digital bank</li></ul><ul><li>These digital banks, along with the central bank promoting regulatory change, are driving the big Brazil banks onto the defensive; they will need to address opex more immediately to limit the erosion of their revenues and ultimately returns</li></ul><ul><li>The incumbents’ drive to lower opex is challenged by the need to continue to invest in and spend on their digital transformation, as well as the need to accelerate IT spend to account for consumer habits becoming increasingly digital under Covid-19</li></ul><ul><li>Risks to our positive view on <a href="https://www.smartkarma.com/entities/banco-inter-sa" target="_blank" data-smartkarma-citation="entities:28162:1" rel="noopener">Banco Inter SA (BIDI11 BZ)</a> and digital bank opportunities include incumbent bank client inertia, high customer acquisition costs for digital banks and slow cross-sales growth as well as higher than expected cost of risk for digital banks</li></ul>

The Covid-19 pandemic is driving customer to change behaviour, and is accelerating and deepening the shift to digital banking and financial services, which presents hurdles for incumbents and mainly opportunities for FinTechs
Banco Inter SA (BIDI11 BZ)  is our preferred name on growth potential, solidity of capital base and steady customer growth; it offers premium growth prospects and trades on an attractive PEGIn the Brazil digital banking space, the leader, Nubank, remains privately owned, and it does not yet appear to have IPO plans
Banco Pan SA (BPAN4 BZ) is one to watch in the low-income space; it is transitioning from a low-income focused traditional to digital bankThese digital banks, along with the central bank promoting regulatory change, are driving the big Brazil banks onto the defensive; they will need to address opex more immediately to limit the erosion of their revenues and ultimately returnsThe incumbents’ drive to lower opex is challenged by the need to continue to invest in and spend on their digital transformation, as well as the need to accelerate IT spend to account for consumer habits becoming increasingly digital under Covid-19Risks to our positive view on Banco Inter SA (BIDI11 BZ) and digital bank opportunities include incumbent bank client inertia, high customer acquisition costs for digital banks and slow cross-sales growth as well as higher than expected cost of risk for digital banks

Brazil Digital Banking: Client Behaviour Changes Driving Growth, with Regulatory Catalysts

Brazil

The Brazilian real is the official currency of the Federative Republic of Brazil.  

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BRL (USDBRL 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

Emerging Market Currencies: Hopes and Realities

EM currencies appreciated vs USD and outperformed in fortnight following US elections but since then performance more differentiated. Consensus is...

Olivier Desbarres

Trading a USD Short Squeeze, Then Re Short

Dollar Index (DXY CURNCY) is ripe for a squeeze higher given elevated short positioning and signs of downside exhaustion in the form of a...

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

Brazil Digital Banking: Client Behaviour Changes Driving Growth, with Regulatory Catalysts

The Covid-19 pandemic is driving customer to change behaviour, and is accelerating and deepening the shift to digital banking and financial...

Victor Galliano

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