RMIT Classification: Trusted sted
Stage 1: Market View Report (Individual Assignment)
Weight: 20%
Assignment due date: Week 7 – Friday 21st April 5:00 PM (Melbourne time)
Length: 700 words
Feedback mode: Feedback will be provided by the dealing room instructor on canvas
before the submission of the stage 2 report.
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 one from the following currency pairs:
1. AUD/USD
2. AUD/GBP
3. AUD/JPY
4. GBP/USD
5. USD/JPY
***Note: Each member must exclusively choose a different currency pair***
Market View Guidelines:
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 learned 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, and exchange rate expectations. You may also use
other factors such as the global health crisis, geo-political climate, and the 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 learned in class and one other factor if you want your market
view to be strong.
For news and market data, you can use professional magazines, newspapers
(see RMIT library e-subscriptions) and financial institutions’ websites (e.g IMF,
World Bank, OECD databases, and the respective country’s central bank
website).
Note that when it says relative, you are required to compare factors relatively e.g.,
if 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
RMIT Classification: Trusted sted
cause a currency to appreciate or depreciate against another. For example, if the
interest rate in the US is higher than that in Australia and you believe that the interest
rate may increase in the US which will cause the AUD to depreciate against the USD,
you need to explain why this causes the depreciation of AUD against USD. In addition
to examining various macroeconomic indicators (often referred to as fundamental
analysis), the historical behaviour of exchange rates can also be analysed to predict
future behaviour (technical 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 clearly state 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 appreciates/depreciates 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/Tradingeconomics/investopedia, 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. You are expected to include at least 4
references. For information regarding Harvard referencing style, please refer to
http://www.lib.rmit.edu.au/easy-cite/
.
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. 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 for the week 8
dealing session as a group. You will then be required to write up your Forex report as
a group in the next stage.