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Forex Weekly Outlook February 6-10

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Forex Weekly Outlook February 6-10
  • Forex Weekly Outlook February 6-10

The US economy remains strong after data from the labor department showed the economy added 227,000 jobs in January. More than 157,000 jobs created in December. But the average hourly earnings drop to 2.5 percent from 2.9 percent year-on year, suggesting that the inflation rate may not be advancing as previously thought. Therefore, the Fed won’t be in rush to hike rates, at least not this March. This is one of the reasons the US dollar lost momentum against most of its counterparts except the British Pound last week.

Accordingly, the productivity level cooled in the fourth quarter to 1.3 percent from 3.5 percent recorded in the third quarter. This further affirm that businesses have relied on more hiring rather than investing in technology to increase efficiency. Still, the services sector expanded (56.5) in January at about the same pace as in the previous month.

However, the uncertainty surrounding the new government policies – fiscal spending, immigration, tax, etc. continued to weigh on the business outlook and dollar strength as businesses and foreign investors are yet to ascertain market direction.

In the U.K, the services sector contracted in January to 54.5 from 56.2 recorded in December as the costs of running a business surged to a 6-year high. The main concern now is the extent to which costs are rising and if it’s temporary or part of the issues raised by Governor Mark Carney on Thursday that there were risks to the economic outlook as the country start its Brexit journey.

Although the U.K. Monetary policy Committee upgraded its economic growth rate for 2017 from 1.4 percent to 2 percent, the governor reiterated that there are risks ahead and that the positive outlook does not negate Brexit consequences.

“The Brexit journey is really just beginning — while the direction of travel is clear, there will be twists and turns along the way,” the BOE governor Mark Carney told a press conference in London on Thursday. He said that with inflation accelerating and risks to growth on the horizon, “we can see scenarios in either direction” for policy.

With uncertainty growing from the US to the Europe, it is clear that commodities like gold and safe haven assets in general remain attractive as investors look to reduce risk exposure while looking for clues as to what the US and Theresa May led Brexit team plan to achieve going forward.

This week USDJPY and GBPJPY top my last for the reason stated above.

USDJPY

I first mentioned this pair sell potential three weeks ago, but rebounded with 78 pips to our first target to hit a mid-term high of 115.60. Ever since it has lost about 332 pips in the last three weeks.

However, with rising uncertainty in the US, investors are likely to continue to jump on safe haven assets like the yen to avoid the US dollar volatility. Hence, this pair is likely to continue its downward trend this week.

Forex Weekly Outlook February 6-10

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A break of 111.81 support would possibly increase the attractiveness of this pair and open up 109.56 support levels first established in April 2016, which is below 20-day moving average. Below is my previous quote on this pair.

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.

GBPJPY

Three weeks ago, I mentioned here the uncertainty surrounding the British pound and why this pair offer unique sell opportunity. But with the pound sterling uncertainty confirmed by BOE unclear as the UK commence its Brexit journey, the embattled currency remains less attractive and it is likely to get worse by March, 2017 when the Brexit will be officially triggered.

Forex Weekly Outlook February 6-10

Click to enlarge

While on the other hand, the yen remained attractive as investors scramble for the haven asset to reduce risk exposure and avoid volatility.

Again, the weekly candlestick closed as a bearish engulfed pattern, which was below 142.42 support levels –now resistance. With the present yen attractiveness, I will be looking to sell the pair below 142.42 resistance levels this week for 134.90 targets. A break of that level should open up 129.85 as the second target.

Last Week Recap

EURCAD

This week, I remain bearish on this pair for two reasons. One, the surge in risk level in the Euro-area will continue to weigh on euro-single currency. While Canadian dollar will likely remain attractive as commodities like crude oil gain and increase in investments in the country boost its manufacturing sector amid Trump likely favoured trade policy.

Forex Weekly Outlook February 6-10

Click to enlarge

EURGBP

This pair lost its gains after the Bank of England Governor Mark Carney statement alerting investors to potential risk ahead of Brexit. Hence I will be standing aside this week to monitor price action and comments from the UK policy makers.

Forex Weekly Outlook February 6-10

Click to enlarge

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 Hits Eight-Month High at 1,120/$ Amidst Central Bank Reforms

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New Naira Notes

The Nigerian Naira has surged to an eight-month high of 1,120 against the US dollar on the parallel market, commonly referred to as the black market.

This significant appreciation comes on the heels of a series of foreign exchange (FX) reforms initiated by the Central Bank of Nigeria (CBN), which have effectively unlocked dollar liquidity within the economy.

According to data compiled from online platforms and street traders, the current exchange rate reflects a gain of 62.95% for the Naira against the dollar compared to its level of 1,825 per dollar in February 2024.

Market sentiment suggests that the recent strengthening of the Naira can be attributed to a subdued demand for the US dollar, coupled with ample liquidity in the market, particularly during the holiday period.

Despite a decline in external reserves, Nigeria’s currency strengthened to 1,230.61 per dollar on the official FX market before the holidays.

The recent uptick in the Naira’s value follows the CBN’s decision to review the exchange rate for Bureau De Change (BDC) Operators to 1,101 per dollar from 1,251 per dollar.

Also, the CBN announced plans to sell $15.88 million to 1,588 eligible BDCs, further bolstering dollar liquidity in the market.

The CBN’s proactive approach to FX management, including the resolution of foreign exchange backlogs amounting to US$7 billion, has instilled confidence among investors and market participants.

Furthermore, the apex bank’s commitment to implementing reforms aimed at enhancing transparency and efficiency in the FX market has yielded positive results.

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Forex

Zimbabwe’s Gold-Backed Currency Surges 0.2% Against US Dollar

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Zimbabwe’s newly introduced gold-backed currency, known as ZiG, surged by 0.2% against the US dollar on its second day of trading.

This development has sparked both cautious optimism and renewed concerns about the nation’s financial stability.

The Reserve Bank of Zimbabwe reported that the exchange rate for ZiG strengthened to 13.53 per US dollar, compared to its initial rate of 13.56 per dollar on its debut trading day.

The slight but significant uptick in value comes as a welcome sign for Zimbabwean authorities who have been striving to establish a functional local currency amid persistent economic challenges.

The ZiG currency, introduced as the country’s sixth attempt to stabilize its monetary system, is backed by 2,522 kilograms of gold and approximately $100 million in foreign currency reserves held by the central bank.

This gold backing is seen as a crucial step to restore confidence in Zimbabwe’s currency after years of hyperinflation and currency instability.

Despite the positive momentum witnessed in the currency market, the transition to ZiG has not been without its hurdles. Banks, retailers, and utilities across the nation have been grappling with the logistical challenges of adopting the new currency, leading to disruptions in commerce nationwide.

Many businesses are still in the process of updating their systems to accommodate ZiG transactions, causing delays and confusion in payment processing.

The Zimbabwean government has set a deadline of April 12 for businesses to fully transition their electronic systems to ZiG.

However, reports indicate that only a third of the financial institutions linked to the national payments platform have been able to process ZiG payments effectively, highlighting the ongoing challenges facing the currency transition.

While the surge in ZiG’s value against the US dollar offers a glimmer of hope for Zimbabwe’s economic prospects, experts caution that sustained stability will depend on factors beyond short-term fluctuations.

Market confidence, effective monetary policies, and structural reforms will all play crucial roles in determining the long-term viability of the ZiG currency and the broader economic recovery efforts in Zimbabwe.

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Naira

Dollar to Naira Black Market Today, April 9th, 2024

As of April 9th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,200 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 9th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,200 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 N1,240 and sell it at N1,230 on Monday, April 9th, 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: N1,200
  • Selling Rate: N1,190

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