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Forex Weekly Outlook July 4 – 8

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Outlook

Post-Brexit has not only changed the way investors and businesses approach the markets, but also have up the level of uncertainty and wariness of financial market participants. Last week, the US final GDP showed that the economy rose at a 1.1 percent annualized rate in the first quarter, better than 0.8 percent previously estimated. While both consumer confidence index and manufacturing sector showed reasonable improvement, yet the dollar lost substantial ground against its counterparts, partly due to the Federal Reserve’s decision to delay rate hike, and perhaps that explained the level of uncertainty of the financial markets post-Brexit.

Another important factor to consider going forward is the global political system — the US presidential election, the Japanese election, the UK election and the on-going Australia election are key determinants of market direction as investors and businesses are expected to make adjustments to their investments and business decisions to accommodate possible changes in policies peradventure incoming administration deem it fit.

This week, traders are also expected to start pricing in the possibility of Bank of England cutting interest rates further, after the governor of the Bank of England Mark Carney said on Friday that “it is now clear that uncertainty could remain high for a while — the economic outlook has weakened and necessitate some monetary easing over the summer.” Hence, caution is advised. This week the EURUSD, AUDJPY and USDJPY top the list. Lets start;

EURUSD

There is no doubt that the US economy has rebounded from 38,000 non-farm payrolls recorded in May, what is uncertain is to what extent. For instance, the manufacturing sector improved significantly to its highest in a year, while unemployment claims surged 1k last week. But the Euro 19-nation single currency on the other hand is entangled in post-Brexit gloomy outlook with uncertainty hanging over its head, although the US dollar lost part of its gains last week I believed its largely due to a delay in the rate decision and that the Euro currency is presently not attractive enough to topple the US dollar gains just yet.

Outlook

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If the pair failed to remain below 1.2304 resistance level, a sustained break will nullify this analysis as it would have confirmed an important bullish pattern. Otherwise, I am bearish on the EURUSD and expect a break of 1.1090 to open up 1.0714 target. Non-farm payroll report is due on Friday.

AUDJPY

The Aussie dollar attracted substantial buyers last week to gain back part of its losses against the Japanese yen. While the outlook seems okay without factoring in China’s weak manufacturing report released on Friday and chaotic electoral process that left the country without a conclusive election result last week, the pair remains bearish as long as 78.14 resistance level holds. Especially knowing the potential of the Japanese yen as a safe haven asset in an eventful period like this, I remain bearish on AUDJPY with 73.544 as the target.

Outlook

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Again Japan’s manufacturing sector, consumer confidence and trade balance improved well enough to reinforce the sort of demand needed to weigh on the pair, since weak China’s manufacturing sector will reflect on Aussie dollar this July anyways. ┬áIt is widely expected that the Reserve Bank of Australia will leave its rate unchanged on Tuesday.

USDJPY

As long as global risks remain high, global investors will continue to sell-off this pair to contain risk exposure. Even with 2 percent inflation target gradually becoming elusive, Japanese yen remains attractive.

USDJPYDaily

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This pair remains on the downside as long as 104.25 resistance level holds.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Naira

Naira’s Upsurge Strains Nigeria’s Foreign-Exchange Reserves

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New Naira notes

As the Nigerian Naira continued to rebound from its record low against its global counterparts, the nation’s foreign exchange reserves has been on the decline, according to the data published by the Central Bank of Nigeria (CBN) on its website.

CBN data showed liquid reserves have plummeted by 5.6% since March 18 to $31.7 billion as of April 12, the largest decline recorded over a similar period since April 2020.

The recent surge in the Naira follows a series of measures implemented by the Central Bank to liberalize the currency market and allow for a more flexible exchange rate system.

These measures included devaluing the Naira by 43% in January and implementing strategies to attract capital inflows while clearing the backlog of pent-up dollar demand.

Charles Robertson, the head of macro strategy at FIM Partners, acknowledged the Central Bank’s efforts to restore the Naira to a realistic exchange rate, suggesting that it aims to stimulate investment in the local currency and enhance liquidity in the foreign exchange market.

Despite the rapid depletion of foreign-exchange reserves, Nigeria still maintains a significant cushion, bolstered by a rally in oil prices and inflows from multilateral loans.

Gross reserves of approximately $32.6 billion provide coverage for about six months’ worth of imports, according to the International Monetary Fund.

The Central Bank’s disclosure last month that it had cleared a backlog of overdue dollar purchase agreements, estimated at $7 billion since the beginning of the year, indicates progress in addressing longstanding currency challenges.

However, uncertainties remain regarding the extent of dollar debt retained by the Central Bank as revealed by its financial statements late last year.

Furthermore, the decline in foreign-exchange reserves persists despite a surge in inflows into Nigeria’s capital markets, driven by interest rate hikes and increased attractiveness of local debt.

Foreign portfolio inflows exceeded $1 billion in February alone, contributing to a total of at least $2.3 billion received so far this year, according to central bank data.

Analysts remain cautiously optimistic about the trajectory of Nigeria’s foreign-exchange reserves, anticipating stabilization or potential growth fueled by anticipated inflows from Afreximbank, the World Bank, and potential eurobond issuance.

Also, the resurgence of oil prices and the expected return of remittances through official channels offer prospects for replenishing reserves in the near future.

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Naira

Dollar to Naira Black Market Today, April 17th, 2024

As of April 17th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,50 NGN in the black market, also referred to as the parallel market or Aboki fx.

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New Naira notes

As of April 17th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,50 NGN in the black market, also referred to as the parallel market or Aboki fx.

For those engaging in currency transactions in the Lagos Parallel Market (Black Market), buyers purchase a dollar for N1,70 and sell it at N1,060 on Tuesday, April 16th, 2024 based on information from Bureau De Change (BDC).

Meaning, the Naira exchange rate improved when compared to today’s rate below.

This black market rate signifies the value at which individuals can trade their dollars for Naira outside the official or regulated exchange channels.

Investors and participants closely monitor these parallel market rates for a more immediate reflection of currency dynamics.

How Much is Dollar to Naira Today in the Black Market?

Kindly be aware that the Central Bank of Nigeria (CBN) does not acknowledge the existence of the parallel market, commonly referred to as the black market.

The CBN has advised individuals seeking to participate in Forex transactions to utilize official banking channels.

Black Market Dollar to Naira Exchange Rate

  • Buying Rate: N1,050
  • Selling Rate: N1,040

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Naira

Naira Appreciates to N1,136/$ Officially, N1,050/$ Parallel Market

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naira

The Nigerian Naira appreciated to N1,136 against the United States Dollar at the official market and rose to N1,050 at the parallel market.

At the official foreign exchange market, data from the FMDQ Exchange revealed that the Naira strengthened by 6.1 percent or N69 from its previous rate of N1,205/$ recorded on Friday to N1,136/$ on Monday.

This surge underscores the effectiveness of recent foreign exchange directives implemented by the Central Bank of Nigeria (CBN), aimed at stabilizing the Naira and bolstering liquidity in the market.

At the parallel market, the Naira appreciated to N1,050 against the Dollar, reflecting an improvement in the currency’s value in informal trading circles.

This resurgence has brought renewed hope to traders and businesses operating in the informal sector, as they anticipate further strengthening of the Naira in the coming days.

The improved exchange rate follows a series of strategic interventions by the CBN to address foreign exchange challenges and stabilize the Naira.

The positive momentum in the forex market has been further reinforced by a surge in total inflows into the Nigerian Autonomous Foreign Exchange Market (NAFEM), which increased by 41.7 percent to $3.75 billion in March, compared to $2.64 billion in February.

Commenting on the recent developments, analysts at Afrinvest expressed optimism about the continued strengthening of the Naira, attributing it to the CBN’s intensified efforts to bolster liquidity in the market.

They anticipate further improvements in the exchange rate as the apex bank maintains its proactive stance on forex management.

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