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Forex Weekly Outlook August 28 – September 1

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  • Forex Weekly Outlook August 28 – September 1

The three key Central Banks’ Governors, Janet Yellen, Mario Draghi and Haruhiko Kuroda on Friday agreed that weak global inflation and poor wage growth are impeding central banks from reducing monetary accommodation. Suggesting top global banks are not in a hurry to hike rates just yet.

Also, global uncertainties remain high after North Korea fired 3 short range missiles on Saturday. This is coming amid U.S. political unrest and Brexit ongoing negotiation.

Again, the Bank of Japan Governor, Haruhiko Kuroda, believed the 4 percent economic growth rate recorded by the world’s third largest economy in the second quarter is unsustainable and vowed to maintain an accommodative policy for some time.

Overall, the weak wage growth and low consumer prices remain a concern for central banks. However, growing job creation and moderate domestic spending have helped sustain growth in most nations.

This week, GBPJPY, NZDJPY, USDCAD, and GBPUSD.

GBPJPY

Since I first mentioned this pair two weeks ago, it has plunged by another 69 pips. However, the volume of trade remains low. But with the U.K consumer spending waning and economic growth stagnant at 0.3 percent, the lowest among Group seven nations. It is right to expect a further decline of the British pound —especially as the third leg of Brexit negotiation commences this week.

Forex Weekly Outlook August 28 - September 1

Technically, since this pair closed below the ascending channel two weeks ago, it has failed to break 142.42 resistance level and has remained below the 20-day moving average.

This week, I remain bearish on this pair as long as 142.42 resistance holds.

NZDJPY

As explained last week, this pair dropped 79 pips to hit our first target at 78.83. But failed to closed below key support level to validate bearish continuation after the Bank of Japan Governor, Haruhiko Kuroda said inflation rate is far from BOJ’s 2 percent target and wage growth remains low even with recent progress, therefore, he is not looking at unwinding balance sheet or raising rates until these imbalances normalized. This statement weakened the Yen outlook marginally, however, the rising global uncertainties continued to boost Yen attractiveness because of its haven status and growing economy.

NZDJPYWeekly

Therefore, this week I will look to sell this pair below 78.83 support levels that double as the ascending channel as seen above for 76.25 support, our target 2.

USDCAD

The USDCAD closed slightly below our key support (five weeks ago target 1) to reaffirm bearish continuation. Again, while the US dollar attractiveness is weighed upon by uncertainties, the Canadian dollar strength is also impacted by the growing US uncertainties, its largest trading partner.

Forex Weekly Outlook August 28 - September 1

However, the Canadian fundamentals just like the US are solid but with minimal domestic headwinds, the economy continued to create new jobs and the rising housing cost has been curbed. Making the Canadian dollar more attractive to investors than the US dollar, especially after the Bank of Canada raised rates for the first time in 7 years.

This week, I remain bearish on this pair and will look to sell below 1.2494 resistance for 1.2217 targets, our second target 5 weeks ago.

GBPUSD

The weak US dollar is aiding the British Pound, even though the U.K economic data shows the economy has started slowing down ahead of Brexit negotiation. The pound is likely to gain against the US dollar just like other major currencies are expected to surge as the Donald Trump administration looks to access the damage of Harvey continuous rain damage, estimated at $24 billion and the danger of North Korea 3 short range missiles.

Forex Weekly Outlook August 28 - September 1

While I remain bearish on this pair, I will be standing aside this week to watch price action as I expect the US dollar to dip further this week. However, on a sustained break of 1.2785 support level, I will look to sell for 1.2602 targets.

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

Nigeria Hits Historic High as Currency in Circulation Surges to N3.69 Trillion

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Nigeria’s currency in circulation surged to a historic high of N3.69 trillion, according to data released by the Central Bank of Nigeria (CBN).

This figure represents an increase of N43.07 billion or 1.18 percent from the total of N3.65 trillion reported in January 2024 and a 13.64 percent year-on-year rise from N3.25 trillion reported in February 2023.

Currency in circulation encompasses the physical cash, including paper notes and coins, actively used in transactions between consumers and businesses within the country.

The latest statistics indicate a considerable uptick in the availability of cash within the Nigerian economy.

The surge in currency supply comes amidst lingering concerns over a potential cash crunch following the monetary policy adjustments by the CBN, particularly the aggressive tightening stance of the Monetary Policy Committee (MPC).

Analysts attribute this spike to various factors, including the fear factor stemming from the cash crunch experienced in 2023 and lingering uncertainties surrounding the administration of physical currency.

Despite the surge in currency in circulation, Nigeria’s economic growth remains sluggish, with projections indicating growth rates of around 2.9 percent to 3.1 percent for 2024.

Also, inflation remains a significant concern, with the headline inflation rate climbing to 31.70 percent in February 2024 from 29.9 percent reported in January 2024, according to data from the National Bureau of Statistics (NBS).

The CBN’s proactive approach to monetary policy, including a historic increase in the monetary policy rate (MPR) to 24.75 percent, underscores the central bank’s commitment to addressing economic challenges and fostering stability amidst persistent pressures.

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Naira

Nigerian Naira Surges to N1,350 per Dollar in Parallel Market

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New Naira notes

The Nigerian Naira has appreciated to N1,350 per dollar in the parallel market, a significant gain from its previous rate of N1,430 per dollar just a day earlier.

Similarly, in the Nigerian Foreign Exchange Market (NAFEM), the naira strengthened to N1,382.95 per dollar, indicating an upward trend across key forex segments.

Data from FMDQ revealed that the indicative exchange rate for NAFEM fell to N1,382.95 per dollar from N1,408.04 per dollar on the previous day, representing a gain of N25.09 for the naira.

This surge in the naira’s value has widened the margin between the parallel market rate and NAFEM to N32.95 per dollar from N21.96 per dollar previously.

Analysts attribute this impressive surge to recent foreign exchange reforms implemented by the Central Bank of Nigeria (CBN).

These reforms, including the consolidation of exchange rate windows and liberalization of the FX market, have contributed to bolstering the naira’s strength against the dollar.

The CBN’s proactive measures aim to promote stability, transparency, and liquidity in the foreign exchange market, fostering confidence among investors and strengthening the national currency.

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Forex

CBN Governor Reveals $2.4 Billion Forex Forwards Under Investigation

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Naira Exchange Rates - Investors King

Governor Yemi Cardoso of the Central Bank of Nigeria (CBN) disclosed that law enforcement agencies are currently investigating foreign exchange forwards valued at $2.4 billion.

This announcement came in the wake of the Monetary Policy Committee (MPC) meeting held in Abuja on Tuesday, March 26.

Governor Cardoso shed light on the meticulous forensic audit conducted on these transactions, which uncovered numerous discrepancies, rendering them ineligible for payment.

The CBN, while settling certain tranches of FX backlog, encountered transactions riddled with issues concerning their authenticity.

To address these concerns, Deloitte management consultants were enlisted to conduct a comprehensive forensic analysis spanning several months.

The audit revealed a multitude of irregularities, including allocations disbursed without corresponding requests, lack of proper documentation, and instances of outright illegality.

Cardoso emphasized the gravity of the situation, stating, “We refused to validate them because, apart from the fact that documentation was not satisfactory in many cases, they were outright illegal.”

He underscored the commitment of law enforcement agencies to investigate these transactions thoroughly.

Despite concerns about potential backlogs among stakeholders, Cardoso assured that the market remains open and transparent for addressing any outstanding contractual obligations.

The CBN has diligently verified and settled recognized backlogs of forward transactions.

This revelation comes at a critical juncture as Nigeria grapples with economic challenges, including inflationary pressures.

The MPC’s decision to raise the benchmark interest rate to 24.75 percent reflects efforts to stabilize prices and restore the purchasing power of the average Nigerian.

As investigations unfold and regulatory scrutiny intensifies, the CBN’s commitment to transparency and financial integrity will be closely monitored by stakeholders across the nation.

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