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Forex Weekly Outlook June 13 – 17

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Forex Weekly Outlook June 13 – 17

 

The dollar rallied again last week after crude oil prices plunged and commodity backed currencies followed suit, but the uncertainties surrounding global market ahead of Federal Reserve meeting this week and Britain’s referendum later in the month continues.

Last week, Fed Chair Janet Yellen said interest rate hikes are coming but gave no clue as to when, while explaining that the economy has registered considerable growth towards Fed’s goals of maximum employment and price stability, she said a shift in the economic outlook will necessitate a corresponding shift in Fed’s policy. Also the US unemployment claims improved from 268,000 to 264,000 following a six-year low nonfarm payrolls report in May. Given the current market condition, I will be trading EURUSD, AUDJPY and last week pairs.

EURUSD

The 19-nation currency, Euro is enmeshed in brexit and as such vulnerable, even with 0.6 percent revised economic growth in the first quarter. The currency remains unattractive as investors continued to seek less volatile currency with predictable direction. On the other hand, the US dollar is moderately stable with rate hike off the table, and I believe Fed’s positive assertion of the economy has renewed interest in the US dollar compared to the Euro.

outlook

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Again, the EURUSD chart shows the pair has been unable to breakout of the channel started in October, and failed again six weeks ago after reaching 1.1614. Last week’s candlestick further confirmed bearish continuation by closing as a dark cloud cover into previous bullish candlestick. This week, as long as price remains below 1.1338, I am bearish on EURUSD with 1.1090 as the target.

US retail sales, building permits and inflation reports are due later in the week.

AUDJPY

Since CPI data showed, Australian inflation fell 0.2 percent in the first quarter of the year, the Aussie dollar has lost about 827 pips. Currently, the commodity-backed currency is being weighed upon by drop in commodity prices and heightened global risks. With all the positive economic data, ranging from the fastest growth rate in four years to low unemployment rate, the currency remains unattractive as investors seem to doubt the viability of Governor Glenn Stevens claims regarding the economic outlook, especially with the fact that Australia depend on struggling China for exports and most of her manufacturing.

In fact, an investment manager who oversees the equivalent of about $11 billion in fixed income assets at BTIM in Sydney, Vima Gor published an odd analysis on Thursday, saying the Australian dollar is at far more risk than most people think, and predicted 40 cents.

While Japanese yen remain attractive and projected to be even more in demand as investors scramble for safe haven assets to curtail possible shortfall of brexit as markets await referendum result.

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From the chart, this pair has been trading in channel since October 2014 and lost a total of 2,421 pips, but after RBA cut interest rate by 25 basis points in April, the pair has failed to sustain price above 80.82 resistance level. Another confirmation is the last two rejection candlesticks (shooting stars) confirming rejection of higher prices, this week I am bearish on AUDJPY provided price remains below 80.82 resistance level while keeping an eye on Australia’s unemployment report and BOJ monetary policy statement due on Thursday. My target will be 75.83.

Last Week Recap

GBPCAD plunged 544 pips last week amid brexit, and hits our 1.8480 price target. But this week 1.8117 support level is our temporary setback and with Canadian dollar more likely to retreat with oil prices. I will be cautious and look for a sell below 1.8105 (2016 low), while targeting 1.7755.

GBPCADDaily

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GBPCHF lost over 505 pips last week after closing the Monday gap during Asian trading session on Tuesday. But with our target one and two met (496 pips), I will be careful trading this pair this week for the simple fact that both paired currencies are prone to brexit’s effect. That being said, I am bearish on GBPCHF provided 1.3926 resistance level holds, with 1.3507 as target.

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USDJPY last week view is the same this week, “its failure to break 111.65 resistance level after three attempts, and eventually breaching 107.47 support level on Friday, suggest that the continuation of the downward trend has started and as long as investors are yet to know the fate of EU and UK regarding the referendum, and the US June rate hike decision off the table. The Japanese yen remain attractive, especially with G7 agreement hindering BOJ from intervening in its gains.”

outlook

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This week, as long as 107.47 resistance level holds, I am bearish on USDJPY with 105.21 as the first target and 102.17 second target.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Forex

Haven Currencies Gained Across the Board as Investors Assesses New COVID Variant

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Investors are moving their funds to known safe-haven currencies to curb risk exposure while they evaluate the effect of the new covid variant on global financial markets.

Two cases of the new Covid variant called B.1.1.529 that emanated from South Africa were reported in Hong Kong on Friday, increasing concerns it could hurt global economic recovery and compel nations to start closing their borders going into the new year.

Leading safe-haven currency, the Japanese Yen gained against the United States Dollar to 113.151 at 8:40 pm Nigerian time, down from 115.450 it attained on Thursday as shown below.

Similarly, the Swiss Franc outperformed other currencies as its attractiveness surged among global investors looking to avert catastrophe amid rising global uncertainties.

Swiss Franc rose against the United States Dollar to 0.92187 from 0.93604 it peaked on Thursday before news that the United Kingdom and other nations were considering shutting their borders.

The Euro rebounded against the United States Dollar after plunging from 1.18905 it traded in August to 1.12039 before paring losses to 1.13129 when the news of new covid variant became a concern.

Surprisingly, gold, a known haven asset, failed to sustain its earlier gain and pulled back from $1815.46 to $1788.10 at the time of writing. Another indication of rising global uncertainty.

Even experts like Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA, had earlier predicted that gold will shine given its characteristics as a haven asset.

He said “Times like this are when gold shines and we’re seeing investors flock back to an old reliable friend today. It has pulled a little off its highs after hitting $1,815 earlier in the session but it remains above $1,800 at the time of writing. It’s an interesting one for gold and bonds, as the situation now is very different from last year.”

Investors however seems to be dumping the tradition risk aversion commodity for something more stable, especially with bitcoin and other cryptocurrencies now doing better number in terms of gain in a period like this.

Crude oil has dropped more than 5 percent or $10 today as energy traders aggressively closed the positions to better assess the situation.

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Naira

Naira Faces Temporary Stability at the Official Window

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Naira Exchange Rates - Investors King

After closing at N415.07 on Wednesday, the currency temporarily rose to open at N413.58 per dollar on Thursday, before returning to close at N415.07 per dollar by the end of the day. This is according to the data obtained from the Investors and Exporters window.

The last few days have seen the emergence of marginal changes in the value of the Naira against the dollar, with the changes not being more than N1 or N2 at a time. The constant flux of the Naira at a marginal rate seems to suggest that the currency will remain at this level over the upcoming festive period.

This could however be changed, but only by drastic action on the part of the Central Bank of Nigeria.

The FMDQ website shows the Spot rate and Forward rate of the Naira, with the Spot rate representing the range of prices at which the Naira traded throughout an entire day. For Thursday, the Naira traded between N406 per dollar and N452 per dollar.

This means that all the dollar transactions that took place across Thursday took place with the Naira trading at a high of N406 per dollar and at a low of N452 per dollar. However, at the end of the day the Naira had settled down at N415.07 per dollar.

The Forward rate refers to the value of the Naira against the dollar which applies to transactions which have been agreed to take place in the future, and not immediately. Thursday’s forward rate was particularly low, with its highest coming at N452.61 per dollar, and the lowest falling in at N453.75 per dollar.

This could particularly discourage individuals or groups who would have been seeking to agree on some future deals on Thursday, with the low prices not spelling positivity for trade.

The turnover of the dollar recorded on Thursday sat ta $98.07 million, meaning that the entirety of the dollar traded across all the rates amounted to a little less than $100 million.

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eNaira

eNaira Compatible With Other Countries’ Digital Currencies

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The Central Bank of Nigeria (CBN) has stated that the execution of the country’s digital currency will be done in four different phases, and also lead to the cooperation of the eNaira with the digital currencies from other central banks.

This was said at the licensed payment service providers’ engagement session by the apex bank’s Director of the Information Technology Department, Rakiya Mohammed. The session took place in Lagos on Monday and consisted of interaction with a much wider category of industry players.

A statement released by Rakiya Mohammed stated that the CBN and important stakeholders in the payments ecosystem, especially the Payment Service Providers (PSPs) and a wide community of fintech groups, during the engagement session decided to collaborate and ensure that the eNaira which was launched recently is adopted by more people or groups.

Mohammed stated that the complete execution of the digital currency would be done in four different phases, which would culminate in eNaira payment solutions offline, payment across borders and the “interoperability of the eNaira with those of other central banks.”

She also confirmed that the CBN was not competing with the Deposit Banks, neither was it competing with other actors in the payment system space in Nigeria.

According to Mohammed, the engagement session was a continuation of the CBN’s plan to include every stakeholder. She also stated that the country’s apex bank was welcoming of any suggestions and transformations which are directed at adding value to the digital currency and improving the currency’s user experience.

The PSPs (as well as the huge community of fintech groups) were also encouraged to look for more innovative ways to assist members of the public when possible, in the onboarding process and use of eNaira. They have also been encouraged to develop solutions for offline eNaira services, which include cards, wearables and Unstructured Supplementary Service Data (USSD).

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