Stage 1: Market View Report (Individual Assignment)

Task:

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:

Australian Dollar (AUD)

British Pound (GBP)

Canadian Dollar (CAD)

Euro (EUR)

Japanese Yen (JPY)

New Zealand Dollar (NZD)

Swiss Franc (CHF)

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 5 (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 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 and one other factor if you want your market view to be strong.

For news and market data, 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.

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).

For theory discussion, you are expected to cite some academic references from academic journal articles, which can be accessed via RMIT library website. Based on your research, you must individually develop a market view and submit it on Canvas.

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.

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 as a group. You will then be required to write up your Forex report as a group in the next stage

Learning Objectives Assessed

Topics 1 to 5

Students need to demonstrate the capacity to:

Distil, scope and critically analyse problems.                      

Use the technical tools and language of the field.               

Recognise the uncertainty of business decision-making Approach problems with intellectual openness and curiosity.

Communicate and collaborate effectively.

Research and Reflect.

Work to the ethical standards of the profession.

Details

This is a team FOREX analysis exercise and report developed based on professional practices and in discussion with Forex specialists from Thomson Reuters. Further details for this report are provided below in this course guide.

The FOREX Analysis Exercise & Report must be completed in a team. Teams are strictly limited to a minimum of 3 and a maximum of 4 members. A team should aim to have the following strengths: good writing skills, excellent analyst expertise, strong quantitative background, and capable research. Any changes in team size or formulation must be approved by the local lecturers. Every team is required to submit ONE individual piece and ONE group report on the date to be advised.

For this exercise, you are tasked as a member of a Forex dealing team working for a large Singapore bank and trading major foreign currencies in the world. Your senior manager has asked you and your team your team is required to develop a trading strategy and provide a report. Your team will select from the following currencies: USD, AUD, JPY, GBP, THB, and EUR.

Your team works for a renowned FX trading company, Snowy River Ltd. The company specializes in  trading  major  currencies  such  as the Australian  Dollar  (AUD),  British  Pound  (GBP),  Canadian Dollar (CAD), Euro (EUR), Japanese Yen (JPY), New Zealand Dollar (NZD), Swiss Franc (CHF)

and US Dollars (USD). The company also trades various foreign exchange-related derivatives for its clients. In addition, it provides general advice to other clients who trade for themselves. The firm’s chief trading executive,  Jayden Yap,  has requested your team to analyze and explain the behavior of three pairs of exchange rates (for a team of three members; a team of four members is required to analyze and explain four pairs of exchange rates). Based on your analysis, your team is requested to trade foreign currencies in order to improve the firm’s trading strategy and profits. You have been asked to prepare a detailed report in this regard. You will complete this task in two stages.

Part 1: Individual Market View Report

Each of you is part of a team and is required to conduct independent research that will feed into your group report. This research consists of outlining and explaining the behavior of a self-selected pair of exchange rates over the past (i.e., your interpretation of historical data). You must exclusively choose from the currencies listed above and make sure each team member is studying a different currency pair.

In this task, you are required to do some research in order to form a view regarding current and future market conditions.

Do you think that exchange rates will go up or down in the next 3 to 6 months?Why do you think this?

For this, you should first identify the economic factors that influence the foreign exchange rates (review the course materials). Then you should collect and use financial news and news regarding national and international events which are likely to have an impact on the market.

For news and market data, you can use any professional data sources such as professional magazines, institutional websites, and newspapers.

Do not simply quote other people’s opinions. You should present your opinion, and explain in your own words why you hold that opinion in a way that shows that you understand the theory behind the determination of the exchange rates. You can certainly quote evidence that supports your opinion, and this evidence must be correctly referenced (do not submit copies of your collected articles with your report). For your view, you should use at least five references.

Very important: You should conduct thorough research and discuss your market view prior to developing your trading strategies as a team in the next stage.