Bi-weekly forex market analysis brought to you by industry experts

1. SYNERGY FX ALERT
BY TODD DEITERICH | 18.05.15
CENTRAL BANK MINUTES IN FOCUS
The FX market will hear from four Central Banks this week as part of a full slate of first-tier economic data.
The minutes from the most recent meeting from the Reserve Bank of Australia (RBA) will be released on
Tuesday followed by the Bank of England on Wednesday and the FOMC on Thursday. The Bank of Japan
(BoJ) will hold a policy meeting on Friday which will be followed by a press conference.
The views and opinions of the Central bankers will have an impact on their respective currencies within
the context of interest rate direction and expectations. Over the last four weeks, all of the major currency
pairs have gained ground against the USD which has investors looking to the Central Bank minutes for
some measure of clarity.
The fundamental case for the USD rally from last August was based on divergence of monetary policy. We
feel that the FOMC minutes will show this component is still in place. In addition, a Wall Street Journal
survey last week found a large majority of economists (73%) expect the FOMC to hike in September. This
is compared to the European Central bank and the BoJ continuing to expand their balance sheets via QE
well past then.
A wildcard in the current USD directional equation has been the sharp spike in yield on the German 10-
year Bund.
The correlation between the German Bunds and the EUR/USD has pushed the single currency over the
1.1400 level. However, we feel that it's premature to invest in the Euro as though a new bear market in
the USD has begun since this week's Eurozone inflation data is forecasted lower and Greek political
tensions are rising against a backdrop of dwindling finances.
As such, Synergy FX suggests that long-term traders can scale into short EUR/USD positions up to the
1.1465 area with a stop at 1.1680 for an initial target of 1.0860 (see chart). The parameters of this trade
are much wider than usual and the timeframe is over the next 3 to 5 weeks.
The AUD/USD has tested the .8150 area as market sentiment has swung to the belief that the RBA will
hold overnight rates at 2.0% for the remainder of the year. This may or may not be the case, however,
with the RBA quarterly report downgrading the economy out to 2017, the resumption of the downtrend
in Iron Ore prices and softer economic data out of China, the AUD/USD faces significant headwinds at
current levels.
Synergy FX prefers to look at medium-term strategies to the downside by suggesting scale-in selling in
the .8065 to .8090 area with an initial target of .7820 with an .8185 stop.
The USD/JPY has seen the tightest trading ranges of the major pairs as the 118.50 to 120.80 band has
largely been maintained over the last 8 weeks. Although the recent data out of Japan has reflected little
improvement on the growth and inflation aggregates, similar numbers out of the US haven't been
above trend either.

2. BoJ Governor Kuroda's comments during a speech last week that further stimulus was still in the pipeline
was most likely a suggestion and not a signal of imminent policy expansion. Still, a weaker Yen is a
fundamental part of Abenomics and the most likely path of preference.
Longer-term traders with current open long positions can look to add on a pullback to 119.05 or on a
break out of 120.40 with an initial target of 121.85 and a 118.10 stop.
The Sterling has maintained the post-election bid and managed to hold the 1.5700 level for the past few
trading sessions. We prefer to trade the GBP against the EUR and suggest selling EUR/GBP at .7275 with
an initial target of .7115 and a .7345 stop.
SYNERGY FX