Financial Markets: IGSH Bank Currency Pair Analysis Report

This report, prepared for IGSH Bank, provides a detailed analysis of the EUR/USD currency pair within the context of financial markets. It begins with an executive summary and introduction, followed by forecasts for EUR/USD, AUD/USD, and GBP/USD, considering factors like inflation, economic growth, and interest rates. The report outlines trading objectives, risk analysis, and portfolio development strategies. It then delves into the behavior of the EUR/USD forex market, including technical and fundamental analysis. The analysis incorporates current market conditions, such as the impact of the COVID-19 pandemic, interest rate cuts, and quantitative easing programs, to assess market volatility and potential trading strategies. The report includes references to relevant sources and concludes with recommendations for trading the EUR/USD currency pair. The report aims to assist the bank in maximizing profits while minimizing risks through informed strategies.

Running head: FINANCIAL MARKETS
Financial Markets
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2.2 EUR/USD Forecast
The currency pair surged at the weekly opening well rallying up to 1.1236, or holding
their gains despite a fall in the mood of market. Announcement of a massive bond buying
program of $700 billion and slashing down the interest rate to 0.0% was some of the key
highlights that influenced the movement of the EUR/USD Currency Pair. The dollar eased and
the Wall Street Collapse, after reaching their daily 5% limit. The yields on Friday trimmed as
gains as speculative interest rushed well back to safety levels. The greenback in turn got some
market favor, although it can be well said that is against the European Rival, which has remained
in red, well the same has been tough for investors and analyst operating in the Wall Street. The
EU however did not release any specific data, while at the same time the US March NY Empire
State Manufacturing Index was well seen to fall or it got plummeted to -21.5 in March, which
was observed as far more worse than the 4 expected and the previous 12.9.
Inflation Rate
The inflation rate in both the US and UK economy is well expected to fall with the rapid
fall that is seen in the key commodity prices like. Fall in the prices of Oil to a rapid low levels
has well ensured that the inflation rate would be well saying at a rate that is below 2%. As the
global economy is well turning into a recession phase with slowdown in the economy and rapid
fall in the general price level of the commodities. The fall in the inflation rate is well expected to
stay at a rate that is well below the range of 2% this would be particularly due to the slowdown
in the business activity and spending that would be seen in the US and UK Economy. The fall in
the inflation rate and levels goes to well show that both the GBP and USD Currency is expected
to appreciate as the situation and global environment remains volatile.

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Interest Rate
Correlation with the interest rate and exchange rate can be well related with the key
economic theories like International Fisher Effect. Movement of the currency is usually seen
with the help of the changes that they observes in the interest rates. As reported if the US Interest
rates are lower than the European Union, the USD would weaken in respect to Euro. Conversely,
it can be well said that the higher set of Eurozone Interest rate, will be weakening the dollar. The
EUR/USD Currency pair has well fallen to around 1.11 after the stocks are into a down fall. The
move well comes with the decision of Fed to well-cut down the interest rate to around 0% and
announcement of massive Quantitative Easing program that would be well taken by the FED.
The interest rate cut was not only taken by the FED, the RBNZ also announced the rate cut at the
beginning of the week, while the BOJ has well announced a series and action of monetary
measures, which are well taken by the banks for the purpose of well cope with the spread of
deadly virus COVID-19 (EURUSD News and Forecast - FXStreet 2020).
Speculation
Speculation or movement of Currency pair can be well analyzed with the help of the
EUR/USD Currency Pair in which different levels of the currency pair would be playing a
crucial role. From a speculative perspective it is well observed that the currency of EUR/USD is
expected to depreciate whereby the EUR currency would be relatively appreciating with respect
to the USD Currency. The slowdown in the US Economy, falling interest rate and rising health
concerns in the form of social impacts would be affecting the overall currency pair movement.
The factors analyzed would in turn also increase the volatility that is associated with the currency
pair.

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3.0 Goals and Assumptions
3.1 Trading Objectives
From the view perspective of trading it is accordingly important to analyze various
factors that would help us determine the required set of returns that would be well achieved for
the purpose of achieving around 5% in the next three month of time frame. The key secondary
objectives of the trading would be to minimize risk or cover risk by well forecasting the changes
that could occur in the pair of currency analyzed. On the other hand, minimizing risk to the
lowest possible and obtaining the best possible of returns would be the trading objective.
3.2 Risk Analysis and Assumptions
In order to construct an efficient portfolio, we would be well analyzing the various
courses of actions that would be in the form of risk and returns that is expected from the portfolio
over this three month of time frame that has been developed for the portfolio. The currency of
UER/USD is expected to be quite volatile due to the spread of COVID-19 as a pandemic disease
and the slowdown that has been in the economies from the same. The interest rate in the US
economy has been around 0.00% in the recent announcement by the FED. As trade difference
would be well seen in the form of slowdown along with the fall in the commodity prices like Oil
to a consistent lower levels would be affecting the overall volatility of the currency pair
analyzed.
3.3 Portfolio Developments
The portfolio for the analyzed currency pair of EUR/USD would be well constructed well
using a sum of $10 Million in which we would be investing in the EUR Currency as the same is
forecasted to give a rate of return that is a bit higher than USD Currency. The rate of return that

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is expected from the portfolio of 5% is expected to be well generated by the currency pair where
the US Currency will be depreciating because of the lower interest rate which is quite low than
the interest rate in the Euro Zone.
Currency Pairs Risk Rates of Return Distribution of Funds
EUR/USD High Medium US$10 Million (100%)
TOTAL: US$10 Million
4. EUR/USD Forex Market Behaviour
The EUR/USD Currency pair is currently trading in the zonal range of 1.1160 price
range, after well meeting with sellers around 38.2% of retracement of its latest daily run. It was
well noticed that the currency pair well bottomed at 61.8% of retracement of the same rally. The
4-hour chart goes to well show that the pair is well developing a bearish 20 SMA, but so far has
been holding well above a bullish 100 SMA, although it is important to note that the technical
indicators turned into south regions within negative levels. It is estimated that risk will be well
turning bearish on a break below the 1.1145, which is well known as the immediate support
level, and in turn would expose to the price zone of 1.1050 (Key Factors for Trading
EUR/USD 2020).

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References
EUR/USD: Euro - Dollar Rate, Chart, Forecast & Analysis 2020. Available at:
https://www.dailyfx.com/eur-usd (Accessed: 16 March 2020).
EUR/USD: How to trade the Euro-zone CPI Inflation for September 2018, trading opportunities,
figures, data (2018). Available at: https://www.fxstreet.com/analysis/how-to-trade-the-euro-
zone-cpi-inflation-with-eur-usd-201809271030 (Accessed: 16 March 2020).
EURUSD News and Forecast - FXStreet 2020. Available at:
https://www.fxstreet.com/currencies/eurusd (Accessed: 16 March 2020).
Key Factors for Trading EUR/USD 2020. Available at:
https://www.fxempire.com/education/article/key-factors-for-trading-eur-usd-528143 (Accessed:
16 March 2020).