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Forex Weekly Outlook January 16-20

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Forex Weekly Outlook January 16-20
  • Forex Weekly Outlook January 16-20

The US dollar declined against most of its counterparts last week, after president-elect insisted that companies importing into the U.S. must pay border tax, except they move their jobs to the U.S. Even though the retail sales surged 0.6 percent in December and the Federal Reserve Chair, Yellen Janet was certain the economy faces no serious short-term obstacles. The uncertainty surrounding the incoming administration is hurting the attractiveness of the US dollar.

But with the producer price index increasing 0.3 percent in December, and Trump expected to implement his aggressive fiscal spending, the Fed is likely to follow up with a similar monetary policy by hiking rates at least three times in 2017 to manage inflation. This is projected to renew the attractiveness of the US dollar and boost its exchange rate against its counterparts.

Nevertheless, investors are waiting for Yellen Janet speech due on Thursday for clues on monetary stance after consumer prices data scheduled for Wednesday has been released.

In the UK, industrial production rose 2.1 percent, after data showed consumer spending and services sector continued to support the economy. But the pound sterling plunged against most currencies yet again, as low business confidence about the future of the embattled economy impacts the attractiveness of the currency.

While, the market awaits inflation rate and Prime Minister May speech due on Tuesday for possible clues on monetary policy and Brexit direction, experts have said the Minister will signal “hard Brexit” by focusing more on regaining control of the Britain’s borders and laws as against the widely expected access to the European single market.

This, coupled with key economic data due this week could trigger volatility across the Pound pairs – especially the retail sales, Governor Mark Carney speech, earnings and unemployment rate.

Global Oil, the OPEC members for the first time shown commitment to their pledge, and their readiness to cut production further if the need be, but experts have said sustained price above $55 a barrel will spur more production and dampen current progress, as exempted countries are likely to go aggressive with production and exports. This was after data showed the U.S. output rose by 176,000 barrels a day last week and that the production forecast for the year has been raised also.

However, the surge in oil prices will support the growth of emerging economies and help reduce the foreign exchange gap likely to be created if the US Federal Reserve starts tightening monetary policy to manage consumer prices.

Overall, the financial markets look vague ahead of the new US administration and Brexit, but the US economy is strong and likely to remain so. This week, GBPJPY, USDJPY and last week pick top my list.

GBPJPY

The uncertainty created by the Brexit and prime minister May’s comments continued to hurt the Pound sterling. Even after peaking at 148 price levels 5 weeks ago, the pair has lost about 951 pips to trade below 142.42 support (now resistance) levels.

Forex Weekly Outlook January 16-20

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This week, as the world look to welcome Donald Trump as the 45th president of the United States of America, there is likely to be an increase in demands for safe haven currencies as seen last week. Hence, I will be looking to sell below 140.92 resistance for 134.90 as my first target. A sustained break of that level should open up 129.85 support (second target).

Forex Weekly Outlook January 16-20

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USDJPY

For similar reasons, this pair called the top after gaining about 1,384 pips since the emergence of Trump as the president of the U.S. But the pair lost about 250 pips following Trump’s first public conference last week to close at 114.43 support level. This, I will be treating as a risk concern ahead of the new administration’s inauguration. Therefore, I will be expecting the demand for the yen as a safe haven asset to increase while investors await a series of change the president-elect will be passing on to the senate and the ones likely to be approved.

Forex Weekly Outlook January 16-20

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This week, I will be looking to sell this pair below 114.43 price level for 111.81 targets, a sustained break could open up 109.56 support.

Last Week Recap

NZDCAD

This pair is actually unique for the simple fact that the New Zealand dollar gained its last week attractiveness from the increase in demand for safe haven assets and positive outlook of commodity dependent economies. Even though, when data showed its largest trading partner, China, is struggling with capital outflow and the needs to strengthen its overseas alliances to negate Trump’s likely sabotage of their trade relationship, the kiwi continued to gain.

On the other hand, the Canadian currency continued to enjoy strong economic data, increased exports, and moderate manufacturing activities, bolstered by the surge in global oil prices and proposed economic plan by the US president-elect to increase productivity in the US, its largest trading partner.

This week, I remained bearish on this pair as long as 0.9382 resistance holds.

EURCAD

Nothing has changed with EURCAD, last week view 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.

Naira

Daily Naira Exchange Rates; Thursday, May 6, 2021

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Naira Exchange Rates - Investors King

Naira depreciated further at the parallel market on Thursday as the local currency traded at N485 to a United States Dollar. The Nigerian Naira exchanged at N676 to a British Pound and N585 to a Euro as shown below.

Naira Black Market Exchange Rates

Morning * Midday** Evening *** Final Rates

Date USD GBP EURO YUAN Canadian Australian
NGN BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL
06/05/2021 480/485 665/676 575/585 62/69 395/405 292/320

Bureau De Change Naira Rates

Date

USD

GBP

EURO

NGN

BUY/SELL

BUY/SELL

BUY/SELL

06/05/2021

475/482

663/676

575/587

06/05/2021

475/482

663/676

575/587

Central Bank of Nigeria’s Official Naira Rates

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Forex

CBN Extends N5/$ Incentive Period to Boost Dollar Inflow

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Godwin Emefiele - Investors King

The Central Bank of Nigeria (CBN) has extended the N5 per US Dollar incentive on forex remittance indefinitely to boost liquidity and further deepen economic recovery.

The initiative was scheduled to end on May 8. It was introduced to encourage recipients of dollars to use formal banking channels and help the central bank capture such inflows to boost the stability of the local currency, which has been under pressure after oil prices plunged last year.

“We hereby announce the continuation of the scheme until further notice,” the regulator said in a statement on its website on Thursday.

The naira has been devalued three times since last year after a sharp drop in oil earnings, which accounts for 90% of foreign-exchange inflows, and remittances from workers abroad led to a dollar crunch in the West African nation, which produces the most crude in Africa. The local unit traded for 410.31 on the investors and exporters window, also called Nafex, as of 8:51 a.m. in Lagos.

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US Dollar

Dollar Falls as Risk Appetite Improves, Sterling Dips on BoE

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US Dollar - Investorsking.com

The dollar dropped to its lowest point in three days on Thursday as global market risk appetite improved, while sterling zig-zagged after the Bank of England slowed the pace of its bond-buying, but left interest rates unchanged.

Fewer Americans filed new claims for unemployment benefits last week, data showed, as COVID-19 vaccination efforts and massive amounts of government stimulus led to a further reopening of the economy.

While the U.S. economy has been gaining steam, Federal Reserve speakers on Wednesday downplayed the risks of higher inflation.

Those statements reinforced “the lower-for-longer mentality with regards to interest rates,” making the greenback less appealing, said Neil Jones, head of FX sales at Mizuho.

The safehaven U.S. dollar was last down 0.31% at 91.977 against a basket of peer currencies.

“What we’ve seen early in New York is a little bit of back-and-forth gyrations, just because of the Bank of England meeting,” said Erik Bregar, director and head of FX strategy at the Exchange Bank of Canada.

The Bank of England said it would slow the pace of its bond-buying as it sharply increased its forecast for Britain’s economic growth this year after its coronavirus slump, but it stressed it was not tightening monetary policy.

“They kept their QE target in place but they said they are going to reduce the weekly pace of purchases, but that’s not a signal and so sterling has kind of gone up and down and done nothing at the end of the day,” Bregar said.

The pound was last down 0.08% against the weaker dollar at $1.3900 .

The euro was up 0.47% versus the dollar at $1.2061 , and up 0.65% against the pound, at 86.88 pence per euro.

Investors were also paying attention to elections in Scotland that could herald a political showdown over a new independence referendum.

The Australian dollar fell sharply overnight when China said it would stop its economic dialogue with Australia, but the currency had recovered to trade close to flat on the day as European markets opened.

The Aussie was up 0.1% versus the U.S. dollar at 0.77515 at 1028 GMT, having hit as low of 0.7701 overnight.

The New Zealand dollar also dropped and was down 0.1% on the day.

“The announcements of the formal suspension of the economic dialogue between China and Australia should not have a lasting impact on markets given the already strained relationship between the two ahead of the event,” wrote ING strategists in a note to clients.

The Canadian dollar hit a three-and-a-half year high, helped by oil price gains and the Bank of Canada’s recent shift to more hawkish guidance.

In cryptocurrencies, ether traded around $3,500 after reaching a record high of $3,559.97 on Tuesday, skyrocketing nearly 800% this month.

Bitcoin declined 0.2% to $57,392.75.

The meme-based virtual currency Dogecoin soared on Wednesday to an all-time high, extending its 2021 rally to become the fourth-biggest digital coin.

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