'Traders should be prepared for a potential global equities crash in 2016' - Nenad Kerkez, Admiral Markets

NENAD KERKEZ
PROFILE
• Current Job: Analyst and Full Time Trader at Admiral Markets
• Career: Holds a MSc Degree in Economics at the John Naisbitt University (formerly known as Megatrend). Works as Senior lecturer and market analyst for Admiral Markets

View profile at FXStreet

Nenad Kerkez is an analyst and trader who has been in the market since 2008 and works closely with Admiral Markets as their Head Lecturer and Market Analyst. He is well known in the FX Community, ranking in the top 10 traders and analysts in the Forex Factory High Impact Members Ranking.

Nenad covers over 25 currencies on an intraday basis and has a Masters in economics. He also developed CAMMACD TM, a proprietary trading and analysis strategy. Further, he is the co-founder and head of Elite Currensea Trading, an educational website for currency traders.

1. What will 2015 be remembered for?

Several key events, including the following:
1. Greek Financial Crisis. The idea of a potential Grexit from the single currency European Union, and a potential default on Greek Public Debt led to panic on Global Equities and the value of the EUR. Crisis averted for now.

2. Rapid devaluation of Hard Commodities and a weakening of AUD. Demand for Iron Ore and various Base Metals decreased due to China’s GDP growth slowing. China’s demographics and years of bad-investment will be major challenge for their economic growth going forward. Continued devaluation of the Chinese Yuan also set by the PBoC is a sign of slowing GDP growth and a weakening manufacturing sector, which is core to their economy.

3. New Oil extraction techniques of recent years and OPEC maintaining their production to maintain market share caused a massive oversupply of Oil and the price plummeted to new multi-year lows of USD35/bbl. This is also caused a massive weakening of the CAD.

2. Which were your most important achievements this year?

Influencing the life of forex traders in a most positive way as they have had huge success with education and analysis presented on Admiral Markets and FXstreet.

3. What emerging issues or trends should traders prepare for in 2016?

There are three main risks:
1. Slowing GDP Growth in China and Shadow banking risks due to their weakening property market. Expect more pressure on Hard Commodities prices as China shifts from bad-investment in the construction industry to a Consumption and Serviced based economy.

2. USD denominated debt in EMs is a wild card risk. The IMF is very concerned about this risk, especially if the USD strengthens again after future US Fed rate hikes. It is a double whammy affect making it far more expensive for EMs Debtors to repay those type of loans in their weakened local currency. There is USD17Trn in these loans out there in EMs, and that's the equivalent of the EU GDP in size for comparison. If these start to default, expect another global financial crisis.

3. Potential Equities Crash. The last two US Equities crashes occurred within 7 years of each other from 2001 to 2008, are we heading into over-valued Equities in the US with deteriorating Earnings per share. Some Global Investment Banks are sounding warning bells that the next crash is very near.

4. Which will be the best and worst performing currencies in 2016 and why? 

Expect the JPY to strengthen if we get a potential equities crash, and the best pair to trade on that basis is Long AUDJPY. AUD is a risk-on play, and in a risk-off environment is likely to weaken it further, especially the way the prices of its prime commodities exported are moving (Eg Iron Ore, Coal, LNG, Bauxite, Gold).

Also, I expect weakness in the Oil price to remain for the medium term, so I expect weakness in the CAD currency. Refer to my previous posts on the Oil industry and where I think the Oil price will likely stabilize.

5. Which under-the-radar currency pair do you expect to make a big move in 2016?

USDCNY. Expect more devaluations of the CNY if the Chinese economy continues to slow in its economic growth targets.

6. Which macroeconomic events will have the biggest impact on the FX markets in 2016?

A potential Global Equities crash. Expect an appreciation of the JPY being a reserve currency.

7. Which asset class will cause the next financial crisis?

Equities and Property in China. With an oversupply of housing in China, expect price growth to be subdued and potential delinquency on home loans to rise if their manufacturing sector starts to fail. Luckily enough, the PBoC have plenty of room to move with Monetary Policy. If we get a hard-landing in the number two economy in the globe, expect it to cause financial chaos on Global Equities.

8. What will you be focused on next year?

Making money on FX, Working on new projects and education with Admiral Markets , ECS and being happy.

9. Who are the people to watch in 2016 in terms of impact on the industry?

I usually look at the bigger picture. I want to see the whole forest not just a tree so I always read between the lines about possible outcomes of the monetary policies, major announcements and correlation between equities and Forex. In my opinion the major impact is carried by Central Bank presidents, mergers and acquisitions, carry trades, interest rate differentials, natural occurrence (earthquakes, disasters etc…), portfolio flows, currency pegs, governments.

I am more a lone-wolf in the sense of analyzing and forecasting the Forex market. I have learnt to follow my own judgement and technical analysis. "Always trust your own guns".

10. What are your New Year's resolutions?

Haha, I still haven’t thought about it. Why does it have to be New Year?