Global financial markets have been turbulent in recent months, with a never-ending stream of bad news about the US economy. Non-US currencies and commodity indices have also undergone significant adjustments amid risk-aversion sentiment. The greatest concern for investors is how to navigate the 2008 investment environment. KVB Kunlun International understands investors' needs and takes the lead each year before year-end in hosting large-scale economic outlook seminars, enabling Chinese investors in Australia and New Zealand to stay one step ahead, grasp the outlook for major currencies in the coming year, decode the global economic blueprint, and open the door to wealth creation.
This "Global Forex Market Outlook 2008" large-scale seminar was successfully held this month in both Australia and New Zealand, attracting nearly a thousand participants, with a lively atmosphere on-site. The seminar was presented by Mr. Stephen So, Chief Foreign Exchange Strategist of KVB Kunlun International, and Mr. Jimmy Koh, Senior Manager of the Investment Department, who explained matters from both fundamental and technical perspectives, respectively. Taking a two-pronged approach, they delved layer by layer, unraveling the details and explaining the wealth-creation opportunities of 2008 to investors in an accessible manner, earning unanimous acclaim from the audience.
Regarding the broad direction for 2008, Mr. So believes it will be "increasing volatility, continuous new highs, Asia leading the way, and commodities reigning supreme." The market has long worried about the bursting of a global economic bubble, and many analysts have viewed the subprime mortgage issue as the eve of a storm. However, Stephen believes that central banks around the world will spare no expense to rescue the market, and that Asia's rapid growth will be able to compensate for the shortfall from the US economic downturn, leading the world to reach a third wave of peaks.
In addition, mineral energy and commodity prices further benefit from supply shortages. Beyond their inherent strong appreciation potential, even commodity currencies such as the Canadian dollar and the Australian dollar can be viewed favorably! However, investors must note that due to abundant global hot money, an overabundance of high-liquidity hot money and derivative instruments has caused market volatility to increase day by day. Investors would be well advised to diversify their investments at appropriate times to reduce portfolio risk.
Mr. So stated that the subprime mortgage issue is a never-ending problem. Central bank intervention can only resolve the market's crisis of confidence; without bold and decisive measures to address the root of the problem, the underlying trouble will only continue to be prolonged. The Federal Reserve's long-standing administrative missteps have not only failed to set things right, but its ability to price the US dollar is also gradually being lost. Conversely, various countries' foreign exchange reserve portfolios have determined the direction of the US dollar.
Although there are market rumors that various governments will actively reduce their holdings of US dollar assets, Mr. So believes such claims are not entirely accurate. Since global markets also carry volatility risk, the only investment instruments with high liquidity and low risk value are currently still US dollar-settled "US government bonds." Therefore, funds from various countries must still return to the embrace of US dollar bonds. This is evident from recent data showing that foreign holdings of US government bonds have increased rather than decreased! It is believed that a short-term rebound of the US dollar is imminent!
Furthermore, the current trend of the US Dollar Index closely resembles that of the 1980s. Back then, the US Dollar Index similarly formed a bottom three times at the 78-87 level, before rebounding sharply to the 120 level. But can history repeat itself? Mr. So believes it depends on whether the US economy will undergo structural adjustments in 2008. If the US dollar does indeed form a bottom again in 2008, bearish investors must be cautious and on guard!
From all perspectives, since the road to US dollar depreciation stretches endlessly into the distance, gold's value-preservation function will only grow stronger. Mr. So pointed out as early as 2004 that the outlook for gold prices was boundless! Although gold prices have plunged significantly recently due to the sharp drop in oil prices, in the long term, gold prices benefit from US dollar depreciation and the return of the inflationary cycle. It is believed that gold prices still have the opportunity to reach new highs and break through the psychological threshold of US$1,000, though this will inevitably involve financial turbulence like that of this past August. Therefore, investors must patiently wait for the right opportunity. Moreover, different gold investment instruments carry different levels of risk, and investors must choose carefully before making investment decisions. In addition, Mr. So stated: "Inflationary pressure in 2008 will only increase. With oil, mineral, and commodity prices remaining high, investors need to prepare well for the arrival of an era of high inflation."
Gold vs. US Dollar Monthly Chart (chart from the KVB Forexstar platform) - Gold's value-preservation and actual demand are increasing day by day.
Gold prices have the opportunity to challenge the US$1,000 level again, but as market volatility is likewise increasing, investors must exercise caution.
As for the Australian dollar, Mr. So predicted as early as last year that the Australian dollar could ride the rise in mineral energy and reach the 0.8500 level. This year, the Australian dollar has even surged past the 0.9000 level. As Australia's economy in recent years has also benefited from the Asian and Chinese economies—not only coal, minerals, gold, and natural gas, but agricultural commodities will also gain momentum, adding impetus for the Australian dollar to reach new highs. However, with increased volatility, coupled with the not-insignificant hidden concerns for the Australian dollar, it is believed that the Australian dollar's volatility in 2008 will be greater than this year. It is projected that the high will be 0.9800 and the low may reach 0.7800. Investors must operate cautiously.
Australian Dollar vs. US Dollar Monthly Chart (chart from the KVB Forexstar platform) - Due to intensifying market volatility,
although the Australian dollar is expected to reach new highs again, there is also considerable pullback pressure, so investors must exercise caution.
Mr. Jimmy Koh, a trading expert with over 20 years in the industry, offered technical analysis that was entirely distinct from Mr. So's fundamental analysis. Setting aside fundamental factors, his purely chart-based technical analysis gave the audience a glimpse into the appeal of Chart Trading and Trend Trading. Mr. Koh emphasized that the key to profitability lies in the price-spread advantage, so one must always go with the trend and choose the currency pairs most likely to rise or fall. Mr. Koh provided a detailed analysis of several currency pairs with recent investment opportunities, such as EUR/USD, JPY/USD, and GBP/USD.
As for the New Zealand dollar, Mr. Koh stated that, based on technical analysis, the New Zealand dollar is expected to fluctuate back and forth within a 240-point range between 0.7430 and 0.7670 in early 2008. However, investors must be wary of a breakout at these levels, because once these two important support and resistance levels are clearly broken, it would signal that the market will experience extraordinary volatility and adjustment, and investors must operate cautiously.
New Zealand Dollar vs. US Dollar Daily Chart (chart from the KVB Forexstar platform)
The New Zealand dollar is expected to fluctuate back and forth within a 240-point range between 0.7430 and 0.7670 in early 2008.
It is understood that many attendees have been participating in the annual outlook seminar held by KVB Kunlun International since 2003, and they expressed deep admiration for the accurate predictions over the years, continually raising questions in a highly enthusiastic atmosphere. The humorous and witty exchanges throughout left many guests wanting more, and even after the seminar concluded, there was still eager questioning and discussion. Many guests noted that professional Chinese-language financial services in Australia and New Zealand are quite lacking, and they were quite satisfied with the rich and professional content of this seminar hosted by KVB Kunlun International.
Senior management of KVB Kunlun International stated: "We have always devoted ourselves to giving back to the Chinese community. Through this large-scale seminar held in Australia and New Zealand, in addition to enabling local Chinese to be the first to grasp the latest developments in global financial markets, we also provide clients with a comprehensive investment consultation platform, attending to clients' various investment needs from multiple angles and in a comprehensive manner. In the days ahead, we will continue to provide the Chinese communities with one high-end financial seminar after another. Together with Chinese people around the world, let us create a bountiful and brilliant future."
