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Forex Weekly Outlook July 2-6

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  • Forex Weekly Outlook July 2-6

Trade tensions between the US and other nations continued to hurt market sentiment as the US insisted on additional trade tariffs on imported goods from China, Canada, the European Union, and presently pushing allies to stop the importation of Iranian crude oil by November 4th, leading to increased market uncertainty across both emerging and developed markets.

Trade tensions coupled with economic fundamentals have become key factors in projecting possible market direction in recent months, therefore, both will be used to broaden forex outlook ahead of unemployment data this week.

EURUSD

The US dollar gained on strong economic fundamentals and progressive rate hikes by the Federal Reserve, however, lower than expected economic growth rate and slowing consumer spending despite tax cuts weighed on US dollar outlook against the Euro currency last week.

On Friday, the Euro jumped 0.83 percent against the US dollar following an agreement reached by the European Union leaders on immigration control and better than expected Consumer Price Index ‘estimate’ released for the month of June. The agreement is now expected to put an end to the uncertainty surrounding Angela Merkel coalition party and boost business sentiment in the Euro area.

EURUSDWeekly

The EURUSD closed as a bullish pinbar as shown above but below 1.1740 resistance levels. While the data pointed to a better business sentiment in the region, the growing trade war with the US and the possibility of the European Union buying long-dated bonds from next year to maintain record low interest rates will impact the Euro outlook against the greenback and expected to contain rebound below the 1.1852 key resistance that doubled as double top.

Therefore, a break above 1.1740 resistance level should attract enough sellers to reinforce the bearish move started in February towards the ascending channel, a sustained break of that level should open up 1.1398 support.

Please note that a positive Fed report due on Thursday will further strengthen the US dollar outlook against the Euro while a weaker than expected unemployment number may temporarily weigh on EURUSD outlook.

USDCHF

The Swiss Franc gained across the board on Friday after Swiss Finance Minister Ueli Maurer said the Swiss franc-euro rate has normalised and is not a problem for the exports dependent nation. But while the currency surged against the US dollar, it formed an evening star pattern as shown below. Indicating a possible continuation below the 0.9900 support level.

USDCHFDaily

Despite the strong US dollar, the uncertainty surrounding trade war between nations is likely to increase demand for haven currencies like Swiss Franc going forward. Hence, the reason USDCHF is expected to extend downward to 0.9819 support levels on a sustained break of 0.9900 support.

AUDJPY

For a similar reason, the Japanese Yen may get stronger as the rush for haven currencies increases. Also, the Australian dollar is likely to be weighed upon by slowing Chinese economic growth, its largest trading partner, and the ongoing trade war.

Likewise, growing household debt and sluggish wage growth amid rising job creation are hurting Australian retail sales and the economy at large.

AUDJPYWeekly

Therefore, despite the pair closing as a bullish pinbar last week, a close above 83.22 resistance level is needed to validate bullish continuation. Otherwise, the trade war, new ‘steel’ import policy in China and global uncertainty will further push AUDJPY below the ascending channel. The reason I will be treating the pinbar as a temporary rebound and will expect a close below the 81.18 support level to open up 80.44 support.

GBPUSD

The pound remained unattractive below the 1.3357 resistance level, and with the uncertainty surrounding the UK economy ahead of Brexit. I am expecting a retest of 1.3100 support level as long as price remained below the 1.3357 resistance under the ascending channel. Especially with the renewed interest in the US dollar.

GBPUSDWeekly

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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