MARKET BRIEFING – LONDON OPEN 11.11.2015
China has announced that it wants to enhance the international profile of its currency the Yuan. It plans to do this by upgrading the status of its currency by having the Chinese Yuan included into the basket of currencies that make up the International Monetary Fund, Foreign Exchange Reserve Assets.
The IMF Reserve Assets, also known as the Special Drawing Rights was created in 1969 and initially included the US Dollar, British Pound, French Franc, German Deutschmark and Japanese Yen. However with the launch of the single European currency, both the German and French participations were replaced by the Euro.
The SDR is not a currency, however, it is an important tool used by the IMF so as to help maintain global macroeconomic stability. The SDR can be used for instance during times when liquidity and credit in the market dry up such as the case of the 2008 crisis.
Apart from the obvious kudos for China that comes with becoming a component part of the IMF’s, SDR basket, there is also another factor why the second largest global economy would like to be a member of this very exclusive club.
China for some time has strived to reform its economy and evolve it from being the factory of the planet to become a modern global economy with a lower but a more sustainable growth model.
It is, therefore, a fairly obvious requirement that one of the world’s most important economies becomes a member of this foreign exchange based stability mechanism.
As the IMF carries out a review every five years and with the next review due to take place, China sees it vital to its interest that it is currency joins the SDR basket.
Although such a move would be very much symbolic due to the restrictive nature of the current Chinses financial system, it will be however a step towards normalizing China’s economy and bring it in line with the other developed nations.
There are risks if other members, most notably the United States blocks Chinese entry into the IMF SDR programme. Such a move could antagonise the Chinese political establishment who will see this as an embarrassing slap in the face.
A rejection by the IMF could, therefore, see the Chinese Government decide to go it alone and chart their own course with other partners such as Russia and Brazil.
If, however, the Yuan is accepted into the SDR basket, the Chinese Government will have to show concrete willingness to allow the Yuan to move freely and in line with market forces
EURUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.0820
Target 2: 1.0630
Projected range in ATR’s: 0.0099
Daily control level: 1.0790
GBPUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.5220
Target 2: 1.5015
Projected range in ATR’s: 0.0105
Daily control level: 1.5090
USDJPY
The intraday technical outlook
Trend 1 hour: Down
Target 1: 123.95
Target 2: 122.30
Projected range in ATR’s: 0.84
Daily control level: 123.43
USDCHF
The intraday technical outlook
Trend 1 hour: Up
Target 1: 1.0130
Target 2: 0.9985
Projected range in ATR’s: 0.0077
Daily control level: 1.0018
USDCAD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.3375
Target 2: 1.3170
Projected range in ATR’s: 0.0105
Daily control level: 1.3295
AUDUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 0.7100
Target 2: 0.6950
Projected range in ATR’s: 0.0076
Daily control level: 0.7014
GOLD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1104.00
Target 2: 1075.00
Projected range in ATR’s: 14.54
Daily control level: 1096.00
OIL
The intraday technical outlook
Trend 1 hour: Down
Target 1: 46.00
Target 2: 43.00
Projected range in ATR’s: 1.54
Daily control level: 45.95
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