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FX Strategy Summary - BNP Paribas STEER™ Model (5 February 2018)

Core Content Overview

This document outlines the FX trading signals and insights generated by the BNP Paribas STEER™ model on 5 February 2018. It provides updates on new and recently closed positions, along with the model's assessment of the deviation of various currency pairs from their short-term values, expressed in terms of z-scores. The report also includes contact details for FX strategy teams and legal disclaimers regarding the use and nature of the document.

New Trading Signals

• EURSEK - Short:

  • Entry Rate: 9.8398
  • Target: 9.7224
  • Stop Loss: 9.8992
  • Return: 0.00%

• USDSGD - Long:

  • Entry Rate: 1.3173
  • Target: 1.3249
  • Stop Loss: 1.3135
  • Return: 0.00%

• USDMXN - Short:

  • Entry Rate: 18.6153
  • Target: 18.4383
  • Stop Loss: 18.7038
  • Return: 0.00%

Recently Closed Signals

• EURSEK - Long (29-Jan-18):

  • Entry Rate: 9.7860
  • Close Rate: 9.8287 (02-Feb-18)
  • Return: 0.44%

• USDSGD - Long (31-Jan-18):

  • Entry Rate: 1.3081
  • Close Rate: 1.3126 (02-Feb-18)
  • Return: 0.34%

• USDKRW - Short (02-Feb-18):

  • Entry Rate: 1080.1000
  • Close Rate: 1083.8600 (05-Feb-18)
  • Return: -0.35%

Currency Pair Analysis (G10)

Key Insights

• The EURSEK pair has a short-term value of 9.7224, with the spot rate at 9.8390. The model has initiated a short position as the fair value has declined alongside global equity weakness.
• The USDSGD pair has passed the co-integration test, leading to the initiation of a long position with a target of 1.3249. The model had previously closed a long position on 2 February with a gain of 0.35%.
• The USDMXN pair is under a short position with a target of 18.4383, as the recent spot rally appears unjustified relative to short-term fundamentals.
• The USDKRW pair was closed for a loss of 0.35% as it failed the co-integration test.

Deviation from Short-Term Value

The model assesses the deviation of currency pairs from their short-term values using z-scores. The most significant deviations are noted for NZDUSD and GBPUSD, indicating potential overvaluation relative to the model's fair value. In contrast, USDJPY and EURCHF show substantial undervaluation.

Driving Factors

The report highlights the key factors influencing the model's trading signals. These include:

• Global equity weakness impacting the fair value of EURSEK.
• Co-integration test results affecting the decision to initiate or close positions in USDSGD and USDKRW.
• Short-term fundamentals influencing the decision to initiate a short position in USDMXN.

Contacts

FX Strategy Team

Emerging Markets FX & IR Strategy

Legal and Distribution Notice

• This document is non-independent research and may be subject to conflicts of interest.
• It is intended for professional clients and is not investment research for the purpose of MiFID.
• BNP Paribas does not provide investment, financial, legal, or tax advice.
• The document is for information purposes only and does not constitute an offer to sell or issue any financial instruments.
• The indicative prices and performance data are based on internal models and may not reflect actual market conditions.
• The document may contain back-testing results and is not guaranteed to reflect future performance.
• It is confidential and may not be reproduced or distributed without prior written consent.

Disclaimer

• The information and opinions are based on public sources and may not have been independently verified.
• BNP Paribas and its affiliates do not accept any liability for the accuracy or completeness of the information.
• The document may include confidential information and is not to be copied or shared without permission.
• No assurance is given that any transaction will be entered into on the terms indicated.

This summary provides a concise overview of the key trading signals, market analysis, and relevant legal disclaimers from the BNP Paribas STEER™ model report for 5 February 2018.