'ECB will talk down the Euro at some point, it's just a matter of when' - Jameel Ahmad, FXTM

JAMEEL AHMAD 
PROFILE
• Current Job: Chief Market Analyst at ForexTime (FXTM)
• Career: Worked as strategic research analyst for an international brokerage firm. Holds a BA (Hons) degree in Business Studies with Accountancy & Finance from the University of the West of England, Bristol, UK

View profile at FXStreet

Jameel Ahmad is the Chief Market Analyst at ForexTime (FXTM) Limited. Specialising in global development and the analysis of emerging markets, he is frequently quoted in a variety of leading global media outlets including the Financial Times, Wall Street Journal, Reuters, Yahoo, MarketWatch, Nasdaq, Sky News, and the New York Times. 

Having worked on a variety of projects in the UK, US, Middle East and across Europe within the fields of banking, international finance and asset management, Jameel has a strong background not only in forex analysis, but also in risk management and project management.

Do you think this week's late events, with the ECB Meeting and the NFP, will give a clear direction of where the EURUSD might be heading or it's all about the Fed?

The EURUSD is definitely not all about the Fed, and the over-extension towards an unexpected 1.16 offered traders a fantastic selling opportunity. While the Euro is going to gain from pushed back US interest rate expectations, the European economy needs a lower Euro and I am in little doubt that the ECB will at least threaten further QE at a future policy meeting. I am pretty confident that the central bank will talk down the currency appreciation, it’s just a matter of when in my opinion and I will be keeping a very close eye on any dovish comments from the ECB and its President Mario Draghi. While the EURGBP is currently rallying and recovering losses, I am also bearish on this currency pair and I think that expectations in interest rate differentials will lead to the EURGBP pulling back once again at a later time.

Do you think the Fed will hike rates during the next meeting? How it would impact USD value and US economy?

While I understand the concerns over the financial market turmoil and why this is encouraging concerns that the Federal Reserve will need to delay raising interest rates, my opinion is that the markets need confidence and direction, and that the Federal Reserve carrying through with its repeated commitment to raise US interest rates in 2015 will achieve this. The US interest rate hikes are already priced into the USD anyway, but the economic data from the US is consistently robust and I have little doubt that the US economy is ready for its first rate rise. The turbulence around the global markets will allow the central bank to continually repeat that the pace of future rises is going to be slow, which they were always going to be anyway.

As the USD/JPY bounced 500 pips from 116.00 in the last week, and the DXY 400 pips from 92.60, do you think is it time to sell those instruments? What are your targets in both?

The JPY is always my friend in times of global uncertainty, and it never surprises me how quick investors are to flock towards the safe-haven of the JPY. If these China risks intensify, then there is still potential for further safe-haven bids for the JPY. What is worth mentioning though is that the Japanese economic data is starting to alarm participants, and it is becoming likely that the BoJ will consider easing monetary policy further once the China markets find some stability. This means that there is still potentially one more round of JPY weakness to come, which will open a wide variety of different doors for traders. I am long-term bullish on both the GBPJPY and USDJPY as an example.

The Dollar Index is another difficult instrument to predict right now, which can be attributed towards the intense market volatility we are noticing. The Index has recently fallen below its 200MA, which makes it technically vulnerable to further declines. If optimism increases that the Federal Reserve will still begin raising interest rates, or if other central banks begin easing monetary policy once again as they were at the beginning of the year, then we could see another run of strength for the Dollar Index.

AUD/USD is trading at multi-year lows around 0.7100, experts believe the Aussie will hit the 0.7000 soon. What do you think?

Although the RBA appear comfortable leaving monetary policy unchanged for a while, it is becoming increasingly clear that the AUDUSD is inevitably going to fall below 0.70 and it wouldn’t surprise me if the move happens before this interview is published. One of the reasons why I think the RBA has paused easing monetary policy or talking down their currency is because they know that the Australian economy will suffer downside pressures following the China economic concerns. This naturally means that the AUD will continue to decline against the majority of its trading partners anyway. While the China risks are going to hit Australia, their domestic data is improving and there are signs present of the lower interest rates improving Australian data.

Will the last week's oil price rebound last? Do you think the OPEC will cut the barrel production to meet what is seems to be a lower oil demand?

The sudden 25% rally above the multi-year lows in less than a week is just a prime example of the incredible volatility around the financial markets at present. When you look at the technical, WTI is looking bullish, but it is really difficult for me to see the price extending above $50 at this present time. The oversupply in the markets is going nowhere and if anything, it is increasing while the continual global economic uncertainty just points towards there also being less demand for oil. When you combine both of these factors together, it paints a picture that low oil prices are set to stay. Do I think OPEC will cut oil production? This depends on how much the depressed prices are hurting OPEC producers, but I did previously think that there were content for oil prices to remain low in the hope of regaining market share because it’s pretty obvious that the US producers will find it difficult to cope with such a low price of WTI.

How much of the recent turmoil in the markets has to do with EM economies struggling with a strong USD? Do you foresee this situation continuing? Are pairs like USDBRL, USDINR or USDRUB worth trading?

This is a fantastic question and one the most striking conclusions that I took away from that stunning period of USD weakness on Black Monday was that the Emerging Market currencies gained very little, with some of them barely moving at all. The failure of the emerging market currencies to gain any momentum despite such an aggressive period of USD weakness states a huge amount about how weak the investor sentiment towards the emerging markets currently is. The weak sentiment stretches far further than the US interest rate outlook, with further concerns including depressed commodity prices and anxiety over a decline in China trade. While these pressures are currently external, it is only a matter of time before internal pressures such as inflation pressures arise and this is why my outlook on the Emerging market currencies remain bleak. In regards to whether these pairs are worth trading, one of the issues with such crosses is generally a lack of liquidity and availability to trade. It is pretty clear from the continual government protests that the Brazilian Real weakness is ongoing, while the USDRUB will offer opportunities in both directions over the upcoming period depend on which direction WTI swings.