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APRIL - JUNE 2017

NEW PERIOD OF MARKET UNCERTAINTY. BRITAIN SETS A COUNTDOWN CLOCK OF TWO YEARS OF NEGOTIATIONS

TRADER MAGAZINE

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OIL FORCEDTO BOUNCE

TRADING SYSTEMFOR AUD PAIRSUS REFLATION TRADEREALITY CHECK

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article 50

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FXCONTENTs

TRUMP VERSUS CHINA

How Trump negotiations with Xi Jinping could affect the Yuan and the world economy

43

A simple price action based system for a basket of AUD pairs22

07 EDITOR’S NOTE

CURRENCY WATCH

48 NZD – New Zealand Dollar: No hikes expected in 2017 contrary to Q1 market forecasts

11 GBP – Pound Sterling: Is the world’s oldest currency showing its age, or is there life in the old pound yet?

MONETARY POLICIES

25 Analyzing Federal Reserve’s rate hikes: the significance of FED’s recent decision and the importance of future rates hikes.

TOP TRADERS

33 Interview with Karen Foo, number one youth trader in Singapore

TECHNICAL OUTLOOK

38 US Dollar: Is the final leg of the forecast seven-year bull market behind us?

MACROECONOMICS

14 Macroeconomic Fundamentals Round-Up: The macro backdrop at the start of the second quarter

18 Reality Check on the US Reflation Trade: Time to rethink the efficacy of the Trump reflation trade

COMMODITIES

31 Oil Price Forced to Bounce: The battle between OPEC / Non OPEC and US shale plays is here to stay

MARKET WATCH

50 Forex in China: The Dawn of a

New Beginning for Retail FX

TECHNICAL REPORTS

53 Currency Index:CHF-G10 index, long-termNOK-G10 index, long-term

54 Trends and Targets:USD Majors, Major CrossesEUR/GBP, AUD/USD,

56 CONFERENCES & SEMINARS

INTERNATIONAL DATA

57 FX Spot Monitor58 Central Bank Rates59 Economic Data - FX Poll60 Markets View

61 ECONOMIC CALENDAR

TRADING SYSTEM 28ARTICLE 50A new period of market uncertainty. Which impact on the Pound Sterling?

FX TRADER MAGAZINE October - December 2016 3

28 FX TRADER MAGAZINE April - June 2017

Article 50 Its Impact On The Pound Sterling

Article 50 has been triggered on Wednesday 29th March - and with it, a new period of market uncertainty has started clouding the UK economy.

GBP has fallen considerably since the result of the referendum on Britain’s membership of the European Union. This did not come as a great shock to Forex traders, as the market clearly expected the ‘Remain’ campaign to

win the popular vote.

More than six months on, we’re now at a stage where the impact of Brexit will start to make itself known. In this article, we’ll explore what that impact might be.

The situation now

On Monday 20th March, British Prime

Minister Theresa May confirmed that she will trigger Article 50 on Wednesday 29th March. This move was widely anticipated - but still saw GBP dip against its major peers after recent highs.

Article 50 is a piece of European Union law that sets out the process for a member state to leave the European Union. By triggering the legislation,

by Chris Svorcik

FUNDAMENTAL ANALYSISFX

FX TRADER MAGAZINE April - June 2017 29

FXFUNDAMENTAL ANALYSIS

Britain sets a countdown clock of two years to negotiate its exit terms with the remaining 27 EU member states.

How these negotiations unfold will impact upon the pound sterling. Of particular importance to Britain is its future trading relationship with the EU and how that will affect economic growth.

Britain’s future trade with the EU

One area which negotiations will centre around is the new trading relationship that Britain will have with the EU.

We already know what Britain’s position will be here. Theresa May recently announced that the UK would not seek to maintain its membership of the European single market after the completion of Brexit. This ‘certainty’ may have actually helped GBP recover a little ground against the US dollar.

But the volatility of the pound ever since the EU referendum suggests that it is futile to get excited over such news.

In fact, over the long-term, it remains to be seen what effect any new trading relationship would have on British business. There’s a broad consensus amongst trade deal experts that

Britain will not get the market access it currently enjoys as an EU member, meaning British businesses could be subject to EU trading tariffs. Others suggest that Britain is too an important customer to the EU for significant penalties to be imposed.

The truth is, nobody knows what Britain’s future trading relationship with the EU will look like. At the moment, it’s all just conjecture. That’s

why monitoring the negotiations in the coming months takes on significance.

British businesses will also have the challenge of adapting to new regulatory frameworks outside of the European Union. Again, we’re yet to discover what these might be.

The impact on trade so far

Let’s consider some facts. Britain’s largest trading partner has been the EU for a significant amount of time.

So it’s reasonable to assume that

leaving the EU (and by extension the single market) would have greatly damaged British businesses. However, at the time of writing, Brexit has actually helped British exporters. This is because a weaker pound has made it cheaper for other countries to import goods from Britain.

But trouble could be ahead in regards to future trading arrangements. It might be more difficult for Britain

to secure a trade deal on its own due to its market size, which is, of course, a lot smaller than that of the EU.

Britain and the US

One such trade deal that Britain hopes to pursue is

with the US.

Although an enthusiastic supporter of Brexit and the UK, President Trump’s protectionism could make it difficult for the UK to acquire a favourable trade deal with the US.

President Trump himself has expressed a desire to secure transatlantic trade deals with the UK, but his slogan ‘hire American, buy American’ casts doubt on this promise. Would President Trump be so eager, in all reality, to secure a trade deal with the UK if he is committed to only ‘buying American’?