Barclays, Citi monthly FX signals


02 January, AtoZForex.com, London – New year, new opportunities. The following are monthly FX signals from Barclays  and CitiFX month-end fixing models. A given tool for currency traders to acknowledge.

Barclays monthly FX signals

During the month, equity markets have lost some ground throughout developed economies as the ECB delivered less monetary easing than anticipated, while the Fed finally began its rate hiking cycle.

In the USD terms, the US markets underperformed as the dollar weakened versus most of G10 currencies, except the GBP and CAD, last month. Meanwhile, bond markets remained relatively stable, but outperformed in the USD terms in Europe and Japan.

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monthly FX signals

“We expect the passive rebalancing of hedges at month-end to lead to USD buying interest. Moderate signals were generated against EUR and AUD, while there were more modest signals against all the other major currencies,” Barclays argues.

Barclays' month-end model provides signals ranging from '+++' through neutral to '---' to show the strength of this month's signal relative to its history.

monthly FX signals

Citi monthly FX signals

The preliminary month-end FX hedge rebalancing estimate suggests to long the EUR and shorting all other currencies against the USD.

The signal to long the EUR is the strongest, scoring approximately +0.5 historical standard deviations. EU equities and bonds have never fully recovered from the ECB disappointment at the start of the month, Citi noted, thus foreign investors of EU assets will be required to buy EUR in order to move their FX hedges back on target.

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“Relatively better performance of US, Japanese and UK assets reduces euro area investors’ rebalancing needs and leaves this month’s estimated EUR flows skewed towards buying by foreign investors,” Citi added.

For the second month running there is “no strong overall USD signal – stable US bond and equity indices have failed to create significant tracking error in FX hedges," Citi ended.

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