Length: 700 words
Feedback mode: Feedback will be provided by the dealing room instructor on canvas.
· Conduct independent research in order to form a view regarding current and future market conditions and report your findings explaining your market view. Do you believe that exchange rates will go up or down in the next 3 to 6 months? Explain your thinking behind your conclusion?
Students must choose from the following currencies:
1. Australian Dollar (AUD)
2. British Pound (GBP)
3. Canadian Dollar (CAD)
4. Euro (EUR)
5. Japanese Yen (JPY)
6. New Zealand Dollar (NZD)
7. Swiss Franc (CHF)
8. US Dollar (USD)
***Note: Each member must exclusively choose a different currency pair***
Market View Guidelines:
You can choose any combination from these currencies, so something like AUD/USD or AUD/JPY is acceptable, and so is AUD/USD or 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 4 (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, exchange rate expectations. You may also use other factors such the current global health crisis (COVID-19 pandemic), geo-political climate, and latest news that may affect the exchange rate. It is a good idea to use at least 3 of the economic indicators that you have learnt in class if you want your market view to be strong.
For news and market data, you may access Eikon Online, a professional financial data platform used by industry practitioners and experts. You can also use professional magazines, newspapers (see RMIT library e-subscriptions) and financial institutions website (e.g IMF, World Bank, OECD databases and the respective country’s central bank website). Based on your research, you must individually develop a market view and submit it on Canvas.
Note that when it says relative, you are required to compare factors relatively e.g., 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. In addition to examining various macroeconomic indicators (often referred to as fundamental analysis), the historical behaviour of exchange rates can also be analysed to predict future behaviour (technical analysis).
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 or 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 (i.e., 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 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. Any information included from other sources must be appropriately referenced using Harvard referencing style. For information regarding Harvard referencing style, please refer to http://www.lib.rmit.edu.au/easy-cite/
(If you need student account password: s3673513 syx0616!)
Very important: you should conduct thorough research and discuss your market view prior to developing your trading strategies as a group in the next stage. One of your individual market views will form your group’s overall market view (stage 2). Hence, although you are developing your individual view, you are strongly encouraged to discuss your views with your members and prepare and form the trading strategies for the week 8 dealing session as a group. You will then be required to write up your Forex report as a group in the next stage.