Forex Weekly Outlook May 16 – 20
Last week, the US released mixed economic data. As mixed as the figures are, the US dollar gained momentum and attracted buyers based on FED’s rate expectations and the possibility of BOJ intervening in the yen recent gains. Why I am not convinced that non-farm payrolls 160,000 jobs added in April and 294,000 surged in unemployment benefits are good enough to raise rates, I am compelled to lean towards dollar new found strength this week. So I will be looking at NZDUSD, USDCAD and GBPJPY this week.
Reserve Bank of New Zealand Governor, Graeme Wheeler said last week that risks to the financial stability outlook have increased in the past six months, and this he attributed to lower dairy prices due to increase in global dairy supplies. He also mentioned imbalances in the housing market, while the report wasn’t entirely bad. The poor retail sales 0.8 percent released on Friday was, same with core retail sales that dropped from 1.3 percent to 1 percent.
Now, looking at the chart, NZDUSD established ascending channel of January 20th was first broken on May 9th, but the pair pullback on 11th, to retest trendline at 0.6847. Forming an evening star after NZ poor retail sales and better than expected US retail sales reports. This gives us a 232-pips sell opportunity from 0.6847 new resistance level.
This week I am bearish on NZDUSD with 0.6609 as the target, while keeping an eye on Global Dairy Trade and Producer Price Index data due on Tuesday in New Zealand.
As always loonie trend is straight forward, directly proportion to increase in oil prices. But with Bank of Canada Deputy Governor, Larence Schembri, saying nothing in particular in the last central bank financial stability report, we will have to find that loophole ourselves. Canada GDP plunged 0.1 percent last month from 0.6 percent gained in the previous month, adding this to trade deficit that surged from 2.5B to 3.4 billion in March. It is obvious all is not well with the Canadian economy as exports is weak.
Looking at the chart, immediately the trade balance data came out on the 4th of May, USDCAD closed above trendline for the first time since January 20. And has since established a support at 1.2849, with a pinbar closed on Thursday and bullish daily candlestick on Friday, giving us a morning star pattern, a buying opportunity.
This week I remain bullish on this pair with 1.3142 as my target.
This is another pair I have been following for a while, first because of the uncertainty created by the European Union and British June 23 referendum vote, second, because I am in tune with BOJ policies and I think GBPJPY has been oversold since the yen starts its gain and currently trading at 3-year low.
After breaking out of the downward trend on April 22, the pair has been unable to sustain 161.71 price level, hence, lost around 600 pips. While buying might not be okay now if you are not looking at long-term, so is selling because of uncertainty surrounding BOJ monetary policy and poor economic data released from the UK last week. Another reason is a possible change in Bank of Japan monetary policy has the potential to trigger a massive buy.
From the chart, price retest trendline after break-out and has since been trading above 154.39 support level, as long as this support level holds, I remain bullish on GBPJPY and if referendum came out positive or BOJ make monetary policy changes by adding additional stimulus. I will be looking to buy for 161.71 as first target and 169.21 as second, but until then leave comments and lets interact.
What do you think?
Naira to Dollar Rate Today: Naira Exchanges at N463 to Dollar on Black Market
Naira to Dollar Rate on Black Market Today Stood at N463
The Nigerian Naira to dollar rate slid slightly against the United States dollar on Tuesday on the black market as social unrest continues to weigh on the nation’s economic outlook.
The local currency lost N1 against the US dollar to N463 while against the British pound it remains pressured at N592.
This decline continues against the European Union’s common currency, the Euro. The Naira traded at N540 to a single Euro on the black market.
Naira to dollar rate plunged amid rising economic uncertainties and unclear policy path caused by both COVID-19 and government limited fiscal buffers to cushion the negative impacts of the virus on Africa’s largest economy.
This coupled with the ongoing social unrest by the Nigerian youths to force decorum across the Nigerian Police Force and call global attention to decades of systemic intimidation and harassment of innocent citizens.
The Nigerian Stock Exchange has been closing flat since Thursday and continued this week, suggesting that investors are concerns and wary of eventualities as they look to safeguard their investments.
Again, the projected third-quarter recession, low foreign revenue generation, weak consumer spending and the rising cost of living are some of the factors hurting the Nigerian Naira outlook.
Naira to a Dollar Exchange Rate Dips to N462 at Black Market Amid Social Unrest
Youth Protests Weigh on Naira to a Dollar Exchange Rate on Black Market
The ongoing youth protest in Nigeria continues to weigh on the economic outlook and investors’ sentiment across the board.
The Nigerian Naira to a US dollar exchange rate declined by N1 from N461 on Tuesday to N462 on Wednesday and in the early hours of Thursday at the black market.
Against the British Pounds, the Naira exchanged at N600, down from the N592 it traded on Tuesday. This decline continues against Europe’s common currency as the Naira dipped against the Euro by N2 from N538 to N540 on the black market.
The nationwide protest by the Nigerian youth to curb police brutality and harassment on daily basis continues to disrupt business activities in Africa’s largest economy.
Nigerian youths are saying enough is enough after the death of several youths by the law enforcement agency, Special Anti-Robbery Squad (SARS), that was constituted to curb robbery but gone rogue and made extortions, harassments and in some cases killing of innocent citizens their means of livelihood.
Despite the government disbanding the unit and promise to redeploy officers to other existing units, commands and formations, the youths are saying they want a total discharge of corrupt officers and the entire reform of the Nigerian Police Force (NPF) before they will even consider backing down on the ongoing protest, especially after politicians started sponsoring thugs to attack peaceful protesters in Lagos and Abuja.
The Nigerian Stock Exchange closed flat on Wednesday amid rising uncertainty surrounding the government’s ability to de-escalate the situation given the fact that the youths no longer trust the administration or Nigerian government.
The Naira remained weak against global counterparts and expected to plunge further once the National Bureau of Statistics (NBS) release third-quarter Gross Domestic Product (GDP) report expected by many experts to plunge the nation into its second recession in four years.
Naira Declines on the Black Market on Tuesday
Naira Plunges Against Global Counterparts on Tuesday on the Black Market
The Nigerian Naira declined on Tuesday on the black market despite efforts by the Central Bank of Nigeria to prop up the value of the local currency against global counterparts.
The Naira declined by N4 from N457 per US dollar it traded on Friday to N461 on Tuesday morning. Against the European common currency, the Naira fell by N1 to N538 from N537.
However, the local currency improved by N3 against the British pound from N595 it exchanged on Friday to N592 on Tuesday.
Nigeria’s weak economic outlook continues to weigh on the Naira outlook, especially with the economy projected to enter recession in the third quarter.
Despite efforts to cushion the negative effect of COVID-19 on the nation’s economy, unclear policy path amid weak business sentiment and low foreign revenue generation needed to sustain economic productivity in a majorly import-dependent economy drag on Nigerian Naira value and the entire economic outlook.
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