Goldman Sachs: Five Themes For 2015

Goldman Sachs issued a paper Wednesday outlining five themes that could define 2015.

The U.S. dollar may be set to “rally against a broad basket of currencies” in 2015. The technical analysis showed that the Dollar Index “has broken higher from a triangle consolidation which looks very similar to the basing pattern that preceded the last major bull rally from the mid-’90s onwards.”

Theme 1: EUR/USD and USD/CHF “are in the clearest setup” and the EUR/USD “has scope to eventually see ~1.12” and the USD/CHF “could see a significant rally above 1.00.”

Theme 2: U.S. Rates. The “flattening of the U.S. curve seems to be a trade worth keeping into 2015. The 5-/30-year yield curve has room to extend towards ~59bps” and the “5-/10-year could see a move down to ~33bps.”

Theme 3: Gold is setting up to underperform versus Silver. The report “highlights that the Gold/Silver ratio is very high relative to its upper regression bands (two standard deviation range). In the past it has spent little time outside of these bands and typically sees some sort of a 'snap back' to the center. What this implies is that Gold is relatively high vs. Silver and likely setting up to enter a period of underperformance going into next 2015.”

Theme 4: In Asian FX, “a structural base and multi-year trend” is “in the making.”  The “ADXY looks as though it is setting up to turn materially in favor of the USD. USD/KRW, being one of the clearest Asia FX charts, has potential to eventually retrace back to ‘10 levels (~1,278).”

Another highlight was the “USD/SGD which has only recently broken from a triangle pattern that developed against the July ‘11 low. The pattern looks incredibly similar to the basing structure in the late-’90’s –what eventually resulted in a sharp, sustained rally up to ‘01 highs.”

Theme 5: Chinese Equities have “room to extend its current rally” and the Shanghai Composite “also looks strong relative to other indices.”  It “has broken both downtrends from April 2011 and August 2009 over the course of the past few months.”