Trading China via Malaysia

Published on
October 5th, 2018
Duration
11 minutes

Trading China via Malaysia

Trade Ideas ·
Featuring Joseph Trevisani

Published on: October 5th, 2018 • Duration: 11 minutes

What lies ahead for the Chinese currency? Joseph Trevisani, senior analyst at FXStreet, sits down with Justine Underhill to answer this very question. He revisits his bearish bet filmed in July, and reviews how to make the trade using a proxy currency. Filmed on October 2, 2018.

Comments

  • BZ
    Bin Z.
    10 October 2018 @ 09:17
    Hi all, I currently reside in Singapore and Malaysia is our next door neighbour. Not that i disagree on the trade wars trade, but a little more on Malaysia. They just came out of an election where I quote the BBC "92-year-old man has just pulled off the most extraordinary election result in Malaysian history". Was investors confidence shaken by the election hence the depreciation of the MYR? Or was it as a result of intentional depreciation? The increasing strength in the DXY is also worth considering.
    • DR
      David R.
      11 October 2018 @ 01:07
      In fact, the dollar is chronically weak and had a classic bear market rally, which is clearly over now and failed to show any technical characteristics of anything but a bear-market reaction from oversold levels. In fact, the DXY is down 200 pips in 8 weeks (2 months), and down 900 pips since the start of last year. Likewise, USDMYR is far below where it was to begin last year and is also lower today than it was a year ago. The dollar sits right on the verge of a huge technical sell signal and is looking neutral at best, but increasingly bearish. I have been short dollar against euro and gbp, both of which are up sharply against the troubled greenback since summer. USDMYR looks like it might be making a double top, and I'd expect it to move down again unless crude prices collapse. In sum, the slight move up in USDMYR appears merely corrective from oversold levels, barring a move above 4.3 again. Unlikely this year.
  • SR
    Subash R.
    7 October 2018 @ 20:19
    Hi Forex experts, My Fx trading platform (TD ameritrade) doesn't have USD/MYR pair. Could someone please suggest which platform has it?
  • MH
    Marc H.
    5 October 2018 @ 15:33
    Seems like the AUD may be a good proxy for the Yuan as well.
    • DR
      David R.
      5 October 2018 @ 16:31
      Yep that's the norm. And from slightly lower levels, AUDUSD is setting up for a huge move higher technically.
    • DR
      David R.
      7 October 2018 @ 15:33
      .... or maybe not, sorry. I'm not seeing clarity at the moment.
  • JD
    John D.
    5 October 2018 @ 14:17
    No talks about otter macro economic indicators such as current account deficit and target CA deficit by Malaysian government. Not even points about how a sovereign rating downgrade may be on the cards which may be the catalyst for further depreciation. Sloppy analysis.
    • DR
      David R.
      5 October 2018 @ 16:34
      The newly elected gov't is slashing spending. Anyway, fundamentals don't matter in FX trading. It's 80% or more technicals. The fundamentals guys usually lose.
    • JD
      John D.
      5 October 2018 @ 22:19
      Target 3% deficit but CAD expected to breach that
    • DR
      David R.
      7 October 2018 @ 15:10
      So in other words, about half of the US CAD. And the US is going in the wrong direction, with much higher deficits very fast - and nobody in the world will touch US treasuries soon. What could possibly go wrong. Anyway for the MY, crude trumps CAD; maybe why the USD/MYR is *down* over the past year.
    • DR
      David R.
      7 October 2018 @ 15:13
      Apparently they have a budget in Nov... projected deficit was budgeted on assumption of $50 oil. But Friday oil closed $84.03 CAD could drop except they cut taxes - consumer taxes, not taxes for corps to fund stock buybacks, lol.
  • DR
    David R.
    5 October 2018 @ 00:19
    Kudos for having gotten the direction of this trade correctly since July. I recall he also picked long USD/INR, which has actually done much better than USD/MYR!! Note that longer term, USD/INR looks bullish but USD/MYR does not. USD/MYR is actually down 10% since the start of last year from 4.5 to 4.1 (ie., MYR has gained 10% against USD since beginning 2017) and USD/MYR is down 3% on a 12-month basis. Malaysia has rich natural resources and massive oil reserves in a small country enjoying 7-8% growth forever (and a soon-to-be Upper Income country per OECD, on par with UK and Canada by ~2020). So shorting MYR is partly a synthetic bet against the Brent Crude price. So there might be better EM to short, such as his USD/INR pick last time, or the SA Rand as South Africa (like all of Africa) is a totally hopeless basket-case write-off destined to be another Venezuela, Zimbabwe, Congo, etc. Finally, while USD/MYR should drift higher this year, a major reversal is in sight on the chart. And I agree that USD/MYR has faint hope of recovering its prior level of 4.5 in the foreseeable future, unless Brent oil prices crash like they did in 2015.