MARKET VIEW VIDEO PRESENTATION
Background information
The foreign exchange market is an ever-so-changing area of the financial markets. In the foreign exchange market we see extremely rapid movements in exchange rates within a matter of seconds. It is this that makes the FX market a very high risk but very high reward area to trade in.
Traders often prepare trading strategies that can allow them to take advantage of movements in exchange rates. Generally, trading strategies are based on market analysis, which examines past, present and future conditions of the market. These trading strategies are often implemented with the goal to achieve the highest profit, something that we call "speculation".
In the forthcoming dealing sessions you will take the role of FX traders within your company to either raise capital in particular currencies or to be a price maker. You will also be required to speculate in the short term which is where you must apply your trading strategy.
Market view guidelines
To complete the market view, you are required to analyse two currency pairs out of the following currencies: AUD, USD, JPY, EUR and GBP.
You can choose any combination from these currencies, so something like AUD/USD and AUD/JPY is acceptable, and so is AUD/USD and JPY/GBP. You are required to analyse what will happen to these exchange rates in the next 3-6 months. Based on the theory that you have learnt in class from topic 5B(exchange rate determination), you are required to analyse these exchange rates based on the economic indicators of the respective countries. The indicators you learn in this subject include relative interest rates, relative inflation rates, relative growth rates, government intervention and exchange rate expectation. You may also use other factors that may affect the exchange rate (eg.commodity prices .in Australia). It is a good idea to use at least 3 of the indicators that you have learnt in class if you want your market view to be strong.
Note that when it says relative, you are required to compare factors relatively eg. if you are looking at the AUD/USD and you want to analyse interest rates, you must compare Australia's interest rate with the US interest rate. In your analysis, if you have looked at a particular indicator you must write why you believe that this indicator will cause a currency to appreciate or depreciate against another. For example, if the interest rate in the US is higher than in Australia and that the interest rate may increase in the US and you believe it will cause the AUD to depreciate against the USD, you need to explain why this causes depreciation.
Once you have completed your analysis, you must state clearly what you believe will happen to the currency pair of your choice. For example if analysing AUD/USD and you expect the exchange rate to go down, you should state that the AUD would be expected to depreciate against the USD. Keep in mind that currency appreciation and depreciation happens against another currency, so statements like "the AUD will appreciate" and "the AUD/USD will appreciate" do not make sense. Note that only a qualitative forecast is required (ie. currency X appreciate/depreciate against currency Y), a quantitative forecast goes beyond the scope of this subject.
You are expected to source your information and relevant statistics from reputable sources.DO NOT use generic sources such as Trading Economics and Wikipedia otherwise this will attract penalties. These sources get their information from official sources therefore you should be able to get the data from these official sources. For example, if you are after the cash rate of Australia, you can easily source that from the Reserve Bank of Australia rather than get that information from Trading Economics.
Note that youshould keep a list of your references somewhere handy; you will need to write up your market view for your final report.
Format of the market view
The market view will be done in the form of a 10 minute video presentation to be uploaded online to be completed with your dealing session group you formed in Week 4. All group members are expected to present their findings and the presentation must be professional as if they are representing their company to a client.It is expected that there are accompanying visuals (eg. PowerPoint presentation). A leeway of up to 1.5 minutes above the time limit is allowed, but any more will be subject to penalty.
You must make references to where you got your information from verbally. It is sufficient to say something like "According to the Reserve Bank of Australia, the current interest rate is 1.5%" and that will count as a verbal reference. If you are referring to an author, something like "According to Moosa in 2016" will suffice.
Marking
You will bemarked on the following basis:
- Presentation quality (audio-video quality)
- Strength of arguments
- Number of indicators and references
- Clear and concise points made
- Clear conclusion made on currency pairs
- Use of presentation materials such as PowerPoint
- Appearance and preparation of group members
Other things you should keep in mind
Please note that there are only two weeksbetween when the topic 5B lecture is presentedand when your market view is due. I suggest you read ahead in topic 5B. You are welcome toask the teaching staff questions for clarifications.
MAKE USE OF YOUR DEALING ROOM INSTRUCTOR'S CONSULTATION HOURS.
Diagrams are good. If you want to use a chart of historical exchange rates, go ahead. If youwant to use a supply and demand diagram, these are good too, but please construct your ownsupply and demand diagrams as the ones found online will probably not be to your benefit. Ingeneral, diagrams are extremely useful for supporting your answers and greatly encouraged.
Make sure that you are considering historical data of a reasonable timeframe. Forexample, citing the events of 9/11 as a reason why the USD has depreciated against currencyX or the bombing of Hiroshima and Nagasaki and its influence on Japan's economy is not really valid when you are forecasting within the next few month. In general, short-termforecasts should use short-term history.
900 Words +400 words
- Relative interest rates
- Relative inflation rates
- Government intervention
- Commodity prices