Technical & Fundamental Analysis of USD/BDT
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The document analyzes the foreign exchange relationship between the US dollar (USD) and Bangladeshi Taka (BDT), focusing on factors such as inflation rates, interest rates, income levels, government monetary policies, and market expectations. It notes that as of July 31, 2018, the value of USD is ৳84.46, with higher inflation in Bangladesh compared to the US, which impacts currency valuation. Technical analysis indicates potential fluctuations in exchange rates and suggests that investors may find it favorable to sell BDT and buy USD.
Technical & Fundamental Analysis of USD/BDT
- 1. FUNDAMENTAL ANALYSIS USD to BDT To determine the relationship between USD and BDT a research have to be done on international financial market for getting ideas about Inflation rate, Interest rate, Income level, Government’s monetary policy and Market expectation of these countries. On 31/7/2018 at 9:21 pm, the value of US $1 is equal to ৳84.46 Bangladeshi TKmeans 1 US dollar can buy 84.46 Bangladeshi TK. Inflation rate: It means increase or decrease of price level over time due to overflow or lack of money or currency in the country’s economy. Because of this currency value of a country can increase or decrease which can influence the income and buying power of people. Inflation rate of Bangladesh is 5.57% inMay, 2018 till now and inflation rate of USA is 2.8 percent in May of 2018 till now. From this rate we can understand that the inflation rate of Bangladesh is higher than USA. So FX rate of Bangladesh is low and it will remain low until it beats the inflation rate of USA. Inflation FX rate Interest rate: Interest is a charge or income of lending or depositing capital. Or it can be call charge of taking loan. It can be determined on monthly or yearly basis and the rate which is used to determine this is called interest rate. Interest rate in Bangladesh was last recorded at 6.75 percent. The highest was 8.75 percent in 2008 and a record low of 4.50 percent in 2009. The US Fed fund also known as Federal Reserve raised the target range for the federal funds rate by a range of between 1.75 percent and 2 percent during its June which also indicates that the labor market has continued to strengthen and that economic activity has been rising at a first rate. The highest was 20 percent in1980 and lowest was 0.25 percent in 2008. From this situation, it can be said that over all interest rate of Bangladesh is going down and on the other hand, interest rate of USA is going up. Because of this,the FX rate of Bangladesh is low and FX rate of USA is high.
- 2. Country Interest rate FX rate Bangladesh USA Income level: Income means amount of money earned in a particular time by doing legal work. Or in other way income is maximum amount which a person can spend without creating a debt. The level of income is different for different people and even for countries. There are mainly 4 level like, 1. Upper level: Per capita income should be $12,476 and more. 2. Upper middle level: Per capita income should be $4,036 and $12,475 3. Lower middle level: Per capita income should be $1,026 and $4,035 4. Lower level: Per capita income should be $1,025 or less. The per capita income is rising. According to Bangladesh Bureau of Statistics it is now $1,610 in the financial 2016-17 from $1,465 in the financial year 2015-16. So it can be said that Bangladesh is now a lower middle level country, the economy is getting stronger and level of lifestyle is also going up. The per capita income of USA is also rising $59,039 in 2016 to $57,230 in 2015. This also indicates that USA is a upper level income country and economy is rising up. By discussing the above situation it can be said that Bangladesh and USA have uprising income level so the FX rate of this two country is low. Country Income level FX rate Bangladesh USA Govt. Monetary policy: Monetary policy is the macroeconomic policy laid down by the central bank. It involves management of money supply and interest rate. In the current fiscal year 2017-18 govt. introduce some new policy. They are: I. Domestic credit growth target unchanged 15.8% II. Inflation rate at 5.5% III. Private sector credit growth target at 16.8% IV. Broad money growth rate target at 13.3% V. Increase surveillance on the end use of bank loans. The govt. monetary policy is getting stronger and these policies can be beneficial to run the economy of Bangladesh smoothly. Therefore, it will affect the currency means
- 3. Bangladeshi currency will appreciate and this monetary policy regulates the currency fluctuations. In the USA their monetary policy is two like interest rate policy and balance sheet policy. Federal open market committee is gradually increasing the fed fund rate. And this decision is affected in U.S. economy. And with this increasing rate it will support the labor market conditions. With this gradually increasing rate the economic situation will grow up. Balance sheet policy is one kind of monetary policy. Sometimes Federal Reserve faces some problems due to shortage of holdings of treasury and agency securities. It happens because they fail to collect the principal payments from the securities. Therefore, due to the govt. monetary policy of USA, the Currency rate will increase and it can affect the U.S. economy. Market Expectation: Market expectations is the market analysis of some research of market. It is based on some calculations to predict what upcoming situation of market is. If the online graph is analyzed it can be seen that USD/BDT is trending Up means the market expectation is that in future maybe it will go up and in case of us dollar when Bangladeshi taka go up then U.S. dollar appreciate and when Bangladeshi taka go down then U.S. dollar will depreciate. Market Expectation (BD) FX Rate Bearish Market Expectation (USA) FX Rate Bullish COMMENT ON FUNDAMENTAL ANALYSIS: Inflation rate:FX rate of Bangladesh is low and it will remain low until it beats the inflation rate of USA. Monetary policy (BD) FX rate Strengthen Monetary policy (USA) FX rate Strengthen
- 4. Interest rate:that over all interest rate of Bangladesh is going down and on the other hand, interest rate of USA is going up. Because of this, the FX rate of Bangladesh is low and FX rate of USA is high. Income level:Bangladesh and USA have uprising income level so the FX rate of this two country is low. Govt. Monetary policy:Bangladeshi currency will appreciate and the USA Currency rate willincrease. Market Expectation: In case of US dollar, when Bangladeshi taka goes up then U.S. dollar appreciate and when Bangladeshi taka goes down then U.S. dollar will depreciate. TECHNICAL ANALYSIS Trend Analysis COMMENT:From this prediction, it can said that price will fluctuate between TK 84.900 to TK 84.300.Therefore, if price goes up of BD currency, then surely BD currency will depreciate against US dollar and if price goes down of BD currency, then surely BD currency will appreciate against US dollar. Bollinger Bands:
- 5. COMMENT: On 1st August green & red both candle were going up and the BD currency rate were TK. 84.500 to TK. 84.800. The middle line is called average line. When the price line crosses this average line then, currency needs to sell.By analyzing the Bollinger Bands graph, it can say that there is a probability of the BD currency to go downafter 1st to 8thAugust. So it will BD currency value will appreciate. Here, price line is crossed the average line. So currency needs to sell for earn profit. Relative Strength Index (RSI): COMMENT: RSI indicates that two level which is 30 level and 70 level. In this graph we can see that in 17th of june june price crosses the 70 line and also above the 70 line. It indicates that in this point price will suppose to go down that means marketers sell their currency. After that on 29th of june price crosses the 70 line then it again fall down. Then again in 1st july price crosses the 30 line which means market was bullish. So buyers can buy more BD currency and 8th of july market not only touch but also went below the 30 line and then price goes up means bullish pattern and it means buyer buy more BD currency. The price line is 51.3103. The RSI line always have to be from 30 to 70 and now it is in almost middle position, which indicates that currency is neither overbought nor oversold. Support & Resistance:
- 6. COMMENT: By predicting the future possibility, price up to august 8TH then it can be seen that price will go up at the resistance level which is 85.028. On the other hand,if BD taka will fall then it will fall down to 83.416. In this range price will fluctuate.The most probability is that it may go down because of the current political condition of Bangladesh. Moving Average: . COMMENT:The moving average use two average, SMA-short term moving average and LMA-long term moving average. Here SMA is for 10 days which denoted by blue color and LMA is for 20 days which denoted by red color. On June 26th SMT crossed the LMT and went upward. This means a buy signal. Again, on June 29th SMT crossed the LMT and went downward. Which means sell signal. On August 1st the SMT crossed the LMT and going upward which means buy signal. It’s the time to buy the USA currency because its value will depreciate against the BD currency and BD currency needs to sell to buy USA currency. MACD:
- 7. COMMENT:On July 1st MACD line which is the blue line fell below the single red line this means a sell signal. Here the marketers should sell the USD because it was depreciating and Bangladeshi currency was appreciating. However, on August 1st MACD line rise above the single line which means a buy signal. Here marketers should sell the BDT because its value was decreasing and USD value was increasing. From this analysis, it can be said that buying USD will be more profitable for markers. COMMENT ON TECHNICAL ANALYSIS: SPOT RATE of USD/BDT: TK 84.518 (Based on real rate of 1/08/2018) FORWARD RATE of USD/BDT: TK 84.420 (Based on the technical analysis of 8/08/2018) COMMENT: From this, it can be said that the Bangladeshi currency value will appreciate and value of US dollar will depreciate. So it’s the time to sell the BDT and buy the USD to make profit.