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Forex Weekly Outlook June 19-23

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  • Forex Weekly Outlook June 19-23

Despite the weak job data and inflation rate, the Federal Reserve raised rates by 25 basis points to 1.25 percent. Creating further uncertainty amid political investigations in the U.S. and weak global growth.

Even though, the Fed committee was optimistic about pricing and job creation, the foreign exchange market responded differently to the U.S. dollar after retail sales figure showed another 0.3 percent decline. Suggesting consumers are wary of the political tension and uncertainty.

In the UK, the inflation rate jumped 2.9 percent, while retail sales declined 1.2 percent in May. The broad decline was as a result of drop in earnings and rising consumer prices that eroded consumers’ buying power. Plunging the pounds against majors.

CADJPY

The Canadian dollar gained against most of its counterpart last week after Bank of Canada signals that higher rate is possible later in the year with solid job data released two weeks ago and surge in oil prices. This bolstered the attractiveness of the loonie and the odds of a rate hike to 90 percent.

While on the other hand, the Japanese yen declined following the decision of Haruhiko Kuroda led Bank of Japan to maintain current stimulus level without an exit strategy, citing weak inflation, lacklustre wage and slow consumer spending.

http://investorsking.com/wp-content/uploads/2017/06/GBPJPYWeekly-3.png

Technically, CADJPY closed above 83.11 resistance for the first time in almost 3 months, and above 20 days moving average for the first time in almost 4 months last week. Indicating market has started pricing in potential rate hike and a series of positive economic data coming out of Canada of late.

Therefore, the pair is expected to attract enough buyers this week to boost it towards 86.36 resistance levels. Hence, I will be looking to buy this pair above the new support, 83.11 for 86.36 targets.

AUDJPY

After the Reserve Bank of Australia tightened lending rate amid fear of housing bubble. The house prices declined for the first time in 17 months and the unemployment rate improved to 5.5 percent, a 4 year low.

While, the strong labour market boost Aussie dollar’s attractiveness, the Japanese Yen dipped as explained above.

AUDJPYWeekly

Given Australian dollar the edge to gain about 200 pips last week. Accordingly, I am expecting Australia’s positive data and renewed interest to aid AUDJPY rally further this week. Therefore, this week, I will be looking to buy this pair above 84.44 levels for 86.34 targets.

EURNZD

The failure of the European Central Bank to state its exit strategy and get its inflation up, even though the economy is growing at a healthy pace has dampened its outlook and demands among investors.

However, the New Zealand dollar on the other hand, continued to attract buyers after data showed the economy expanded 0.5 percent in the first quarter and current account surplus stood New Zealand $240 million.

EURNZDWeekly

From the chart above, this pair dropped 800 pips in the past one month but last week closed below the 1.5469 support for the first time in two months. Indicating the strength of the bearish movement established a month ago.

EURNZDDaily

Again, EURNZD daily candlestick of Thursday confirmed bearish continuation by closing as a bearish pinball. Also, below the 1.5469 price levels. Therefore, this week as long as 1.5469 holds I am bearish on this pair and will be looking to sell for 1.5118 targets.

Last Week Recap

Last week, the EURUSD was 20 pips short of our 1.1117 targets. The rebound is largely due to poor economic data released on Friday as explained above. But the bearish pinball established 3 weeks ago remained valid and as long as 1.1233 resistance holds I remain bearish on this pair. This is because the US economic data is solid when assessed from on a long-term perspective and in line with Fed targets.

Forex Weekly Outlook June 19-23

Again, the Euro single currency is overpriced without substantial data to sustain current gain. Therefore, a sustained break below the ascending channel should reinforce sellers’ interest and open up 1.1019 targets in days to come.

GBPJPY

The pound gained against the Japanese Yen despite its negative economic data and political issues because the Yen was dumped by investors last week after BOJ failed to succinctly state its exit strategy and raise rates.

GBPJPYWeekly

As long as 142.42 holds, I am bearish on this pair and will be looking to add to my position.

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

Naira Exchange Rates; Monday, May 17, 2021

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Naira - Investors King

The Nigerian Naira opened the week at N484 to a United States Dollar on Monday at the parallel market. The local currency remained stable against the  British Pound at N678 and N581 to a single Euro.

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
17/05/2021 480/484 670/678 577/581 62/68 390/402 292/320
14/05/2021 480/484 670/680 576/581 62/69 390/400 292/320
13/05/2021 479/483 665/673 576/581 62/69 391/402 292/320
12/05/2021 479/483 665/673 576/581 62/69 395/400 292/320

Bureau De Change Naira Rates

Date USD GBP EURO
NGN BUY/SELL BUY/SELL BUY/SELL
17/05/21 475/482 670/677 575/584
15/05/21 475/482 670/677 575/584
14/05/21 475/482 670/677 575/584
13/05/21 475/482 665/674 573/584
12/05/21 475/482 665/674 573/584

Central Bank of Nigeria’s Official Naira Rates

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Forex

Nigeria’s Diaspora Remittances Decline by 28 Percent to $16.8 Billion in 2020

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US dollar - Investors King

Nigeria’s diaspora remittances declined by 27.7 percent or $4.65 billion from $21.45 billion in 2019 to $16.8 billion in 2020, according to the World Bank Migration and Development report.

A critical look into the report shows remittances to sub-Saharan Africa declined by 12.5 percent in 2020 to $42 billion. This was largely due to the 27.7 percent recorded by Africa’s largest economy, Nigeria, which accounted for over 40 percent of the total remittance inflows into the region.

The report noted that once Nigeria’s remittance inflows into the region are excluded, remittances grew by 2.3 percent in 2020 with Zambia recording 37 per cent.

Followed by 16 percent from Mozambique, 9 percent from Kenya and 5 percent from Ghana.

The decline was a result of the global lockdown that dragged on the livelihood of most diaspora and unclear economic policies.

In an effort to change the tide, the Central Bank of Nigeria (CBN) introduced a Naira 4 Dollar Scheme to reverse the downward trend and boost diaspora inflows into the economy.

However, the reports revealed that other external factors like insecurities, global slow down, weak macroeconomic fundamentals, etc continue to discourage capital inflows.

On Tuesday, the CBN, in a new directive, announced it has halved dollar cash deposit from $10,000 to $5000 per month.

The move is geared towards discouraging overreliance on the United States Dollar and encourage local patronage and production.

Mr. Guy Czartoryski, Head of Research at Coronation Asset Management, had said in the report, “We looked at the top 10 banks and the breakdown of their deposits showed that 40 per cent of their deposits are in dollars and it is quite astonishing.”

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Forex

Deposit Money Banks Reduce Dollar-Cash Deposits by 50 Percent to $5000/Month

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United States Dollar - Investors King Ltd

Nigeria’s Deposit Money Banks (DMBs) have reduced the amount of United States Dollars that customers can deposit into their domiciliary accounts by 50 percent from $10,000 to $5,000 per month.

A bank official who preferred not to be mentioned confirmed the new policy to Investors King.

He, however, stated that the new policy does not apply to customers making electronic transfers as well as oil and gas companies and dollar payments into government accounts.

Checks revealed that the Central Bank of Nigeria (CBN) introduced the new policy to discourage the strong appetite for the United States Dollar, which has continued to rise.

A recent report has shown that despite persistent dollar scarcity, around 40 percent of bank deposits in the nation’s top ten banks were in dollars.

Mr. Guy Czartoryski, Head of Research at Coronation Asset Management, had said in the report, “We looked at the top 10 banks and the breakdown of their deposits showed that 40 per cent of their deposits are in dollars and it is quite astonishing.”

According to an analyst at ARM Securities Limited, Mr. Olamofe Olayemi, “this has to do with how much confidence the people have in the naira. Over time, we have seen significant depreciation in the naira.

“If you look at what happened in 2020, no one expected that the naira would be devalued twice in that year and even the outlook, this year is suggesting further depreciation in the naira.

“So, it makes sense to a lot of people to store their money in dollars. But, from the CBN standpoint, you agree with me that there is dollar scarcity.”

He, therefore, argued that the new policy might discourage financial inclusion and encourage cash outside the banking system.

Again, it is important for the flow of money to be captured in the system,” he said.

The CBN had extended its Naira 4 Dollar Scheme last week to further encourage dollar inflow into the Nigerian economy.

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