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Forex Weekly Outlook July 18 – 22

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Yuan

The US economy substantiated June’s 287,000 payrolls with a solid consumer spending last week, although inflation remains unchanged at 0.2 percent. There were evidences that an  increase in the cost of living cause by surging energy prices will pressure costs in the second half of the year. But with unemployment claims at 254,000 and industrial production rising from -0.3 percent to 0.6 percent, it is right to say the US economy is reasonably improving.

While it is wrong to downplay global risk, it is also nimble to note that Brexit effect in itself is yet to materialize, but that the financial markets are being driven by speculators, this is one of the reasons why the U.K. monetary policy committee held rates at 0.5 percent to assess the situation up until they believed Brexit would have crystallized.

Last week, the world‘s third largest economy, Japan also hinted at stimulus expansion and it’s plans to aid domestic consumption by weakening the yen to boost exports. The market is currently pricing in that possibility as it can be seen in yen pairs.  This week, EURUSD, AUD, and USDCAD top the list for me.

EURUSD

This particular pair has remained relatively stagnant after three attempts to break 1.1185 resistance level and sustain the upward trend started in October 2015. But with the US labor market rebounded — couple with solid consumer spending that erased all Euro-single currency gains against the US dollar last week. The US dollar may finally be heading to 1.0714 support level underscored three weeks ago.

EURUSDWeekly

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This week I remain bearish on EURUSD as long as 1.1090 resistance level holds.

AUDUSD

In June, Australia added 7,900 jobs down from 19,200 recorded in the previous month. While this is not entirely bad, the continuous gain of Aussie dollar is, especially after Glenn Steven’s comment on the danger of a strong Aussie dollar on the economy. Nevertheless, China’s lackluster economic data further compounded the prospect of the currency after yearly inflation drop to 1.9 percent and trade surplus plunged from 325bn to 311bn. It is only a matter of time before the Aussie economy reflects drop in China’s imports. This I believe will prompt the RBA to cut rates by 25 basis points, if not for anything but to halt surging currency and enhance its exports.

AUDUSDDaily

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The US dollar on the other hand has rebounded tremendously, following weak 38,000 jobs reported in May and has since boosted consumer spending with little to zero Brexit effect. This week I am bearish on Aussie dollar, because one, the upward trend started in May has been contained below 0.7700 price level and currently I don’t think the Aussie dollar is attractive enough to break 0.76690 resistance level.  If the 0.7484 support level (below 20-day moving average) is breached, it should pave way for 0.7379 and sustained break should open up 0.7143.

USDCAD

The Canadian economy is weighed on by weak manufacturing sector, but the Bank of Canada left interest rate unchanged at 0.5 percent on Wednesday, downplaying the effect of Brexit on the economy even though manufacturing sector is yet to pick up.

USDCADDaily

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From the Chart, this pair has failed to break 1.3142 resistance level after four attempts, but established a sort of range between 1.2849 support level and 1.3142. This week, I am bullish on USDCAD with 1.3142 as the target, a sustainable break should open up 1.3387.

 

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

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eNaira

CBN Refutes Rumours Of Naira Replacement

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The Central Bank of Nigeria (CBN) has on Saturday, refuted rumours that it planned to replace the Naira notes in circulation with digital currency, otherwise known as the eNaira, in due course. 

The apex bank, through its CBN Director, Corporate Communications Department, Mr Osita Nwanisobi, said the statement released, supposedly during the stakeholders’ engagement on eNaira adoption in Asaba, Delta was “misconstrued” and therefore called on the public to completely disregard it.

Nwanisobi said: “The digital version of the naira is meant to complement the existing currency notes and therefore, will circulate simultaneously as means of exchange and store of value.

“The digital legal tender aside from the safety and speedy features, it will also ensure greater access to financial services by the underbanked and unbanked populace thereby enhancing financial inclusion”. 

He therefore urged members of the public and business owners to embrace the digital currency, the eNaira as it offers more possibilities. 

Investors King recalls that in the early hours of Saturday, the Delta State Branch Controller of CBN, Mr Godwin Okafor, had revealed that the Paper currency (Naira) will soon be out of circulation, urging citizens to patronise e-Naira.

Godwin had explained that the bank is the market to further educate the people on the use and importance of the digital currency which is fully backed by the apex bank, unlike Bitcoin which has no legal backing.

He had made the statement at the popular Ogbogonogo market, Delta, during the market sensitisation on e-Naira.

“Paper currency will soon be out of circulation because CBN spent money to print money and people abuse the currency in the market, spraying at the occasion, payment of Okada/tricycle and others and CBN is losing”, he had revealed.

 

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eNaira

“Paper Currency Will Soon be Out of Circulation” – CBN Official

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enaira

Delta State Branch Controller of Central Bank of Nigeria (CBN), Mr Godwin Okafor, has revealed that the Paper currency, (Naira) will soon be out of circulation, urging citizens to patronize e-Naira.

Mr Godwin explained this at the famous Ogbogonogo market, Delta, during the market sensitisation on e-Naira.

“We are here at the market today to sensitise the market people on the use of e-Naira. It is fully backed by CBN, unlike Bitcoin which has no legal backing,” he said.

“Paper currency will soon be out of circulation because CBN spent money to print money and people abuse the currency in the market, spraying at the occasion, payment of Okada/tricycle and others and CBN is losing.”

In relation to this, Investors King had reported the President’s statement on the importance of the e-Naira to the country’s economy. President Buhari said the launching of the E-Naira makes Nigeria the first country in Africa and one of the first few countries in the world to launch a digital currency.

He further said he expects the currency to enable the government to send direct payments to citizens eligible for government welfare programs as well as foster cross-border trade and assist in moving many more people and businesses from the informal sector into the formal sector, therefore, increasing the tax base of the country.

Further, he explained that being a digital currency, it has the potential to increase Nigeria’s GDP by $29 billion over the next 10 years.

Dr. Aminu Bizi, a CBN e-Naira expert, said Delta was chosen as the second state after Lagos to sensitize market women on the currency.

He said the use of e-Naira was effective, charges free unlike ATM and POS and cannot be hacked by fraudsters.

Secretary to the State Government, Chief Patrick Ukah, praised the CBN for the e-Naira project in his remarks.

He expressed his satisfaction with CBN programs, characterizing e-Naira as a “laudable” initiative that has elevated Nigeria’s position in international finance.

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Naira

Naira Exchange Rate Dips at Official Market and Black Market

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Naira - Investors King

The Nigerian Naira opened the week lower against the United States Dollar at the Investors and Exporters (I&E) foreign exchange window now adopted as the official forex window and also at the black market.

The local currency opened at N417.30 against the United States Dollar before declining by 0.60% to close the day at N421.50/$ at the I&E window. Forex traders at the window transacted forex worth $70.68 million on Monday.

For banks and international money transfer operators, the Central Bank of Nigeria buys US Dollars at N414.75 and sells at N415.75. The apex bank buys and sells Pounds Sterling N508.2761 and N509.5016, respectively. For the European common currency, the Euro, the central bank sold it at N433.0453 and acquired it at N432.0036 a unit.

At the parallel market popularly known as the black market, the Naira was exchanged at N599 for a United States Dollar in Abuja.

Speaking on why the exchange rate is that high, Abu Abdullahi, a currency trader at Zone 4 in Abuja, said demand for the U.S. Dollar is high despite persistent scarcity.

Crude Oil

Crude oil extended its gain in the early hours of Tuesday on optimism that China, the world’s largest importer of the commodity, would see substantial demand recovery after the latest data pointed to slowing COVID-19 infections in the hardest-hit areas.

Brent crude oil, the international benchmark for Nigerian crude oil, gained $2.69, or 2.4% to $114.24 a barrel at 5 am Nigerian time. The U.S. West Texas Intermediate (WTI) crude rose $3.71, or 3.4%, to $114.20 a barrel, Investors King understands.

“We are seeing a lot of signals that demand will start returning in that region, supporting higher prices,” said Bob Yawger, director of energy futures at Mizuho.

Cryptocurrency

Finally, Bitcoin and other cryptocurrencies shake off Luna-led decline to pare losses on Tuesday. Luna Foundation Guard (LFG) announced in the late hours of Monday that it was discontinuing Luna Coin and stablecoin (UST) operations to launch a new blockchain protocol that would focus on developers and building in general.

The announcement marked the end of one of the most promising cryptocurrency projects and once again reminds the world of how vulnerable the cryptocurrency space is — regardless of what creators say.

Bitcoin gained 1.99% to $30,366 per coin while Eth, a token of Ethereum, XRP (token of Ripple) and Solana appreciated by 3.15%, 3.25% and 4.39% to close at $2,084.27, $0.431744 and $55.86, respectively.

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