Forex

Forex Weekly Outlook October 10-14

Published

8 years ago

October 9, 2016

Forex Weekly Outlook October 10-14

The US macro data showed remarkable improvement last week, with economic activity in the services sector rising as high as 57.1 in September, the highest in almost a year. While unemployment claims improved by 5,000 to 249,000 — the lowest since April, and 83 consecutive weeks that unemployment benefits will be below 300,000.

Although, labor market added fewer jobs (156,000) than expected in September, the economy continued to grow on so many levels. For instance, the drop in jobs created in the private sector in September was because the US economy is nearing full employment, hence, job growth is expected to slow. Two, the increase in Trade deficit is also as a result of the surge in imports of capital goods and record purchases of services, fees to broadcast the Olympic Games from oversea, which outweigh exports. This should normalize now that the Olympic Games has ended and the manufacturing sector (51.5) has picked up. Likewise, the increase in the unemployment rate to 5 percent from 4.9 percent recorded in August was due to surge in participation rate.

Again, average hourly earnings rose 0.2 percent to 2.6 percent on a yearly basis, indicating that employers are hesitant to fire workers amid a tightening labor market. These are the reasons I think the Friday dip in the US dollar against all the major currencies is temporary, and I expect the greenback to rebound this week as investors digest the data.

In the UK, the pound plunged to 1.1991 against the US dollar on Friday, after the Prime Minister Theresa May comments on the needs for the U.K. to trigger article 50 of the Lisbon Treaty as soon as March 2017, and shun request from financial institutions to consider them in the Brexit agreement as they claimed Brexit could cost banks about £40 billion in revenue and wipe-off as much as 70,000 jobs from the U.K. with about £10 billion in tax revenue.

While, the U.K. business sentiment is presently on the downside, the construction sector (52.3) rebounded in September as companies return to growth, and activities in the manufacturing sector (55.4) and non-manufacturing sector (52.6) picked up, but industrial output (0.2%) expanded below 0.4 percent predicted. Yet, the highest increase since Brexit. Again, the drop in the Pound is expected to further boost exports and tourist patronage while prices of imported goods will surge (bolstering inflation).

However, if Prime Minister Theresa May failed to curb her approach to Brexit, and the European leaders, Angela Merkel and Francois Hollande, continued to insist on no special access to European single market, things could worsen henceforth as European businesses in the UK scramble for safety by moving overseas to cut costs and sustain profitability in the advent of an increase in taxes.

In Japan, the yen halted its 8-day decline against the US dollar on Friday, following a 3.3 percent drop in its value since September 28. Even though, the manufacturing sector expanded 50.4, an increase of 0.1 above preceding month, it is uncertain if the Bank of Japan (BOJ) effort to boost its manufacturing sector and pressure consumer prices by steepen its yield curve has started materializing. Nevertheless, the increase in the odds of the Fed raising rates in December is aiding BOJ monetary stance, however, the BOJ needs to expand its stimulus to sustain the current decline.

Next week, investors will look to deduce Wednesday’s minutes of the Federal Reserve’s September policy meeting and retail sales for possible clues on the next interest rate hike. This week, the EURUSD, AUDUSD and last week NZDUSD top my list.

EURUSD

The US dollar plunged on Friday against the Euro-single currency, following weaker than expected nonfarm payrolls report. While the job report was below expectation, the US economy continued to recover and create more jobs. For the past seven weeks, this pair has failed to break and sustain 1.1233 resistance. Also, considering Euro-area uncertainties post-Brexit and the dollar renewed strength as the odds of the Federal Reserve raising rates in December increase, this pair will likely drop further this week.

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Technically, since the dark cloud cover pattern was formed 7-weeks ago below the ascending channel started since November 2015. This pair has confirmed its bearish stance, but the surge in global risks and uncertainty has impacted the volume of trade as investors are risk averse. This week, as long as price remains below 1.1233 I am bearish on EURUSD with 1.1019 as the first target. A sustained break should open up 1.0821 support as the second target.

AUDUSD

Even though, Australia’s consumer spending surged 0.4 percent in August and building approvals was better than expected. The Aussie dollar declined against the US dollar, indicating that the market is gradually favouring lower Aussie dollar ahead of the Fed rate decision. Likewise, the Reserve Bank of Australia has repeatedly said higher foreign exchange rate will damp its current progress – especially its low inflation.

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This week, as long as price remains below 0.7673 resistance, I am bearish on this pair with 0.7505 as the first target and 0.7379 as the second target. Click August 22-26 weekly outlook for a more detail explanation on the Aussie dollar.

Last week Recap

NZDUSD

This week, I remain bearish on this pair as explained last week here.

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While, I will be standing aside on EURAUD this week, after gaining 131 pips before it retreated. This is to assess the Euro-area economic outlook going forward.

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Samed Olukoya

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Naira

Naira Weakens Against Dollar at Official, Parallel FX Markets

Published

1 day ago

October 22, 2024

Iyanuoluwa Martins

The Naira depreciated at the Nigerian Autonomous Foreign Exchange Market (NAFEM) and the parallel market on Monday, signifying more worries for the local currency.

At the official market – NAFEM – the local currency sold for the US Dollar at N1,603.16/$1 as it recorded a 0.15 percent or N2.38 drop versus N1,600.78/$1 it was valued at the previous session on Friday.

This occurred as supply rose at the opening session as turnover published on the FMDQ Group website stood at $359.22 million indicating that the session’s turnover went higher by 2.4 percent or $8.50 million compared to $350.72 million that was published the day before.

At the unofficial market, the domestic currency closed at N1,698.97 to the US Dollar, a drop of N8.15 compared to N1,690.82/$1 it closed during the Friday trading session.

The weakening of the Naira is happening as the nation’s external reserves continue to swell due to lower US Dollar volume sales to boost liquidity in the official FX market.

Latest data showed the balance in Nigeria’s foreign reserves inched to about $39 billion as CBN data revealed that Nigeria now has $38.992 billion as gross balance in the nation’s external reserves.

The CBN has not made do with its promise to prop up the market as it appears to have halted its weekly FX sales

In a different trend, the domestic currency witnessed a flat outcome against the British currency and the Euro in the week’s opening session.

On the Pound Sterling, the local currency closed at N2,153.90/£1 and N1,800.79/€1 on the Euro.

In the parallel market, the local currency depreciated in its value against the British Pound Sterling by N11.69 to sell at N2,213.25/£1 compared with the preceding session’s N2,201.56/£1 and followed the same pattern against the Euro as it lost N10 to quote at N1,845.29/€1 versus the previous day’s rate of N1,835.29/€1.

The local currency also depreciated further by N8.64 to close at N1,225.82 per Canadian Dollar, compared to Friday’s N1,217.18 per CAD.

Naira

Naira Appreciates 3.6% on US Dollar, Trades N1,600

Published

4 days ago

October 19, 2024

Iyanuoluwa Martins

Naira to Dollar Exchange- Investors King Rate - Investors King

The Naira rose 3.6 percent on the US Dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEX) to exchange at N1,600.78/$1 on Friday, October 18 as the local currency appreciated amid an increased supply.

The domestic currency gained N59.71 on the American currency versus N1,660.49/$1, which it closed in the previous session on Thursday.

Data showed a rise in supply as the turnover published on the FMDQ Group website stood at $350.72 million indicating that the session’s turnover rose by 6.2 percent, indicating a rise of $20.54 million compared to $330.18 million that was published in the last trading session.

Meanwhile, the Naira witnessed a flat outcome against the Pound Sterling and the Euro as it closed on the British currency at N2,153.90/£1 and on the European currency at N1,791.06/€1 quoted in the preceding session.

In the Parallel market, the Naira weakened on the American currency as it closed at N1,690.82 to the US Dollar, a drop of N1.31 compared to N1,689.51/$1 it closed during the Wednesday trading session.

In the past months, the Naira has been volatile against the Dollar at the FX market despite interventions by the Central Bank of Nigeria.

The World Bank also said the Nigerian Naira is among the worst-performing currencies in sub-Sahara Africa at the end of August 2024.

In its latest edition of Africa’s Pulse report, the international organisation said the Naira is at par with the Ethiopian Birr, and South Sudanese Pound in terms of decline in the region.

However, the local currency appreciated in its value against the British Pound Sterling in the official market by N54 to sell at N2,201.93/£1 compared with the preceding session’s N2,147.93/£1 and followed the same pattern against the Euro as it gained N4.58 to quote at N1,835.29/€1 versus the previous day’s rate of N1,839.87/€1.

The local currency also depreciated N16.11 to close at N1,217.18 per Canadian Dollar, compared to Thursday’s N1,201.07 per CAD.

Black Market Rate

Naira Gains on Dollar, Pounds, Others at Black Market, Falls at NAFEX

Published

5 days ago

October 18, 2024

Iyanuoluwa Martins

The Naira gained against the US Dollar in the Parallel segment of the foreign exchange market on Thursday, October 17 as it closed at N1,689.51 to the American currency, a gain of N4.41 compared to N1,693.32/$1 it closed during the Wednesday trading session.

The Naira also gained in its value against the British Pound Sterling in the market by N11.19 to sell at N2,147.93/£1 compared with the preceding session’s N2,159.12/£1 and followed the same pattern against the Euro as it appreciated N8.07 to quote at N1,839.87/€1 versus the previous day’s rate of N1,847.94/€1.

The local currency also appreciated N3.59 to close at N1,201.07 per Canadian Dollar, compared to the previous day’s closing value of N1,204.66 per CAD.

Meanwhile, the Naira depreciated marginally for yet another session against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) to N1,660.49/$1.

The local currency rose fell by 0.05 per cent or N91.01 at the window, according to data obtained from FMDQ Securities Exchange compared to N1,659.69/$1 published in the preceding session on Wednesday.

This occurred as supply rose at the penultimate session as turnover published on the FMDQ Group website stood at $330.18 million indicating that the session’s turnover jumped by 86.4 per cent, indicating that there was a decrease of $153.08 million compared to $177.10 million published the previous day.

The surge in supply could be due to peer-to-peer sales as the Central Bank of Nigeria (CBN) has no actively injected liquidity in the market.

Investors King reports that the CBN in August re-introduced the retail Dutch auction system with the aim to sell US Dollar to FX users on demand basis but after the market witnessed more than $1.1 billion injected into the system, there has been slowdown in the auction.

In a different pattern, the local currency closed flat against the Pound Sterling and depreciated on the Euro at the closing session.

Trading against the British currency, the local currency closed at N2,153.90/£1 while it closed at the rate of N1,791.06/€1, a N9.73 appreciation against N1,800.79/€1 against the Euro.