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Forex Weekly Outlook January 9-13

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U.S Dollar - Investors King
  • Forex Weekly Outlook January 9-13

The U.S dollar rebounded last week after job data showed the economy added just 156,000 jobs in December. Even though, this was lower than 175,000 jobs expected, wages rose 2.9 percent year-on-year. Signaling the labor market is reaching full employment.

However, with the unemployment rate rising 0.1 percent to 4.7 percent from 4.6 percent recorded in November, and wages reaching a 7-year high, experts believe worker shortages may become more frequent in 2017 and force businesses to raise wages even more in order to hire skilled workers.

This is expected to boost consumer spending and pressure costs, therefore, underscoring case for the Federal Reserve to raise rates at least 3 times in 2017.

While, in Canada, oil production cut continued to aid the economy and strengthen the position of the loonie. Bolstering trade balance to 26-month high in December, from a deficit of 1.0 billion. The unemployment rate ticked up to 6.9 percent from 6.8 percent, but a total of 53,700 jobs was created.

Although, the Bank of Canada Governor Stephen Poloz has stressed that there is still plenty of slack in the job market, a few experts have said that considering the fact that the U.S. is Canada’s biggest trading partner, that proposed Trump economic plan will boost job creation in Canada and further help revamp the economy after years of low oil prices.

In China, the People’s Bank of China raised the yuan exchange rate against the U.S dollar by 0.92 percent, making it the biggest one-day increase in more than 11 years. But the currency quickly slumped 0.5 percent after Goldman Sachs Group Inc. and other analysts called on clients to bet against the yuan, citing past scenarios, that the best time to bet against the yuan is after interventions that flushed out bearish positions and argued that intermittent intervention won’t work with Trump presidency, which is expected to cancel TTP deal, hence, they expect the yuan to trade above the 7.1 a dollar in 2017. This week, NZDCAD and EURCAD top my list

NZDCAD

In December, I mentioned the sell opportunity of this pair, since then it has dropped 339 pips to trade at 5-month low. This week, I will treat the evening star formed as the continuation of the bearish trend started in November.

Forex Weekly Outlook January 9-13

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Fundamentally, the Canadian economy is growing and will likely get better going forward, especially with the renewed economic growth in the US and oil production cut by the OPEC. This is projected to aid the Canadian dollar against the New Zealand dollar that currently depends on the struggling Chinese economic performance to function.

Therefore, I will be looking to sell NZDCAD for a 0.9084 target this week as long as 0.9298 resistance holds.

EURCAD

In early December, I mentioned the failure of the ECB’s quantitative easing program to boost inflation rate and help job creation in the manufacturing sector due to weak oversea orders. Since then, this pair has gained 539 pips before retracing below 1.4070 resistance after OPEC successful consensus in December.

Forex Weekly Outlook January 9-13

Click to enlarge

But with the Euro-area enmeshed in low inflation rate, weak manufacturing sector and uncertainty surrounding Brexit. I expect this pair to continue its bearish move following gravestone doji formed three weeks ago and a bearish candlestick that opened and closed below 1.4070 resistance.

So this week, I will be looking to sell this pair for 1.3742 targets as long as 1.4070 resistance holds.

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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Travellers to Access $4k , Businessmen $5K as CBN Boosts Forex Supplies

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Nigerians travelling abroad can access a maximum amount of $4,000 foreign exchange from the banks following the Central Bank of Nigeria’s announcement to increase forex supplies.

Sources from some of the banks said those travelling on business trips could also access a maximum amount of $5,000 for each trip.

The CBN had said in a recent statement that it had concluded plans to increase the amount of foreign exchange allocated to banks to meet legitimate needs.

This followed the warning by the CBN Governor, Mr Godwin Emefiele, to Deposit Money Banks to desist from denying customers the opportunity to purchase foreign exchange.

The purposes to access forex included Personal Travel Allowance, Basic Travel Allowance, tuition fees, and medical payments as well as Small and Medium Enterprises transactions or for the repatriation of Foreign Direct Investment proceeds, the CBN had stated.

At a virtual Bankers’ Committee meeting last week, the bankers discussed how the CBN intended to assist with forex to ensure availability for the upcoming summer period and the return of students to school in September.

The CBN also said the BDCs would continue to have their weekly allocations.

The committee observed that the rates were going up.

It stated, “The CBN has said that all the banks must make available at all times and anyone who wants to buy BTA, PTA, medical fees, student school fees and all the eligible invisible purchases to ensure that Nigerians are not forced to go and queue in the parallel market.

“So what the Central Bank is doing is to encourage all banks to make sure that there is available forex at all times, and that his information should be communicated on all our platforms.

“We are asking our customers to come to the branches and for BTA, for example, present the required documents, which are basically your international passport, your visa, your valid ticket and fill up the form in the bank.

“And what we have been instructed to do is ensure that we don’t turn anybody back and that we should request from the Central Bank once we exhaust the forex that we have.

“The idea is to have a hitch-free summer period and the resumption for children to go back to school. The idea is to ensure there is less pressure on the forex and then the rates will come down.”

Speaking during the virtual meeting, the Group Managing Director, Access Bank, Herbert Wigwe, said, “I think again as part of the central bank’s role in terms of price stability and the need to support small and medium enterprises, there was a highlight of the need for banks to go and support SMEs who import small raw materials for them to set up their businesses.”

The Managing Director, Ecobank, Patrick Akinwuntan, said, “All banks are available to ensure forex need is met.”

Managing Director, Sterling Bank, Abubakar Suleiman, said the CBN had provided sufficient foreign exchange to meet the needs of all legitimate Nigerian travellers and therefore, the idea of going to any other market should not arise at all.

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U.S Dollar Gained as Fed Shifts Interest Rates Hike from 2024 to 2023, Crypto Drops

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Dollar Cryptocurrency - Investors King

The United States Dollar gained on Thursday after the Federal Reserve raised inflation expectations to 3.4 percent and moved the year it is expected to raise interest rates from 2024 to 2023.

Policymakers suggested that interest rates could be raised twice by late 2023 given “Summary of Economic Projections” (SEP) released on Wednesday.

The dollar index, which tracks the greenback against six major currencies, gained 0.63 percent to 91.103, its highest since May 6.

The jump was as a result of renewed interest in the American economy as growth is expected to hit 7 percent in 2021 despite the rising inflation. Similarly, economic conditions are projected to improve faster than initially predicted.

The Federal Reserve Chair Jerome Powell said “the economic conditions in the committee’s forward guidance will be met somewhat sooner than previously expected.”

The interesting thing is that the Fed has gone beyond simply acknowledging that inflation is rising and that the U.S. economy has a lot of momentum, and it has essentially shifted to a much more hawkish stance in this set of projections,” said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

Powell said the central bank will maintain its $120 billion monthly bond-buying program to continue to support the economy but also suggested the possibility of pulling back on quantitative easing used to keep rates low.

I think we’re back to talking about a mild rally in the U.S. dollar and the data becoming very important over the summer period prior to Jackson Hole and September’s meeting,” said Simon Harvey, senior FX market analyst at Monex Europe.

Billions Flow Out of Crypto Market Ahead of Better US Economy

Investors are moving money in billions out of the crypto market, according to Whale Alert reports. On Thursday, 26,999,9990 USDT valued at $26,999,990 was transferred from Binance to an unknown wallet while another 19,999,995 USDT transferred from Bitfinex to an unknown wallet.

Investors moved 20,000,000 USDT to Bitfinex; 55,180 Ether worth $134,030,121 from an unknown wallet to another unknown wallet and 55,000 Ether estimated at $133,389,506 was also transferred to an unknown wallet in the early hours of Thursday.

5,000 Ether worth $12,168,082 and 1,000 Bitcoins worth $38,953,357 were transferred from an unknown wallet to Binance. To see the rest of the money being moved out of crypto space visit Whale Alert.

Cryptocurrency market capitalisation dipped by 5.03 percent in the last 24 hours but has lost $898 billion from $2.523 trillion it attained on Wednesday, May 12, 2021, to $1.625 trillion on Thursday, June 17, 2021.

The plunge in cryptocurrency was a result of improving global economic outlook, especially in the United States of America, the largest crypto investing nation.

The unregulated crypto space is largely treated as a haven asset to avert disaster during the global downturn. Meaning, an improvement in the global economy will generally impact cryptocurrency capital inflow and overall performance. Investors King expects cryptocurrency to extend its decline in the third quarter.

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CBN Raises Customs Forex from N381/US$1 to N404.97/US$

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The Central Bank of Nigeria has raised the Naira exchange rate for cargo clearance from N381/US$1 to N404.97/US$1.

This was confirmed by Uche Ejesieme, the Public Relations Officer (PRO), Tin Can Island Customs Command.

The PRO explained that it was not the customs job description to raise the foreign exchange rate but that of the central bank.

The N24 difference has been implemented on the customs system managed by Web Fontaine.

Commenting on the situation, Kayode Farinto, the Vice President of the Association of Nigerian Licensed Customs Agents, said the increase would further escalate inflation on import goods and hurt consumers’ buying power given the present economic situation.

An importer, Gboyega Adebari, who was shocked at the decision said stakeholders will be greatly affected by the decision.

According to him, “When we went to assess a job this morning, we were told that the exchange rate has been increased, though we have been expecting it, but we don’t expect that it would be so sudden. The implication of this on cargo clearance is that cost of clearance would increase by N24 difference.

“The cargoes that already enroute Nigeria would also be affected, the jobs that we want to clear this morning were affected.

“When you go back to the importer and request for money, they will tell you there is no notification of increase from customs, so the freight forwarders are the ones that would bear the additional cost.”

Naira plunged to N502 against the United States Dollar at the parallel market on Wednesday and traded at N715 to a British Pound and N605 against the European common currency, Euro.

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