19 Nov 2018

FOREX Newsletter

FOREX Newsletter

November 19, 2018

 

Pulse of the Market

·      Fed officials are growing less hawkish with Chair Powell expressing concerns of next year’s headwinds

·      GBP will continue to be one of the biggest stories if there will be a no confidence motion on PM May

·      The Euro closed above the 20-day simple moving average for the first time in over a month

·      AUD ripped higher on the hope that President Trump will forgo another round of tariffs on China

Investors are bailing out of U.S Dollars and their recent moves are important because some of the factors that drove the Dollar higher this year are beginning to change and if that continues the Dollar’s Bull Run will be over. It is still too early to tell but the momentum is certainly skewed to the downside. There have been 4 main factors driving the dollar higher this year – economic outperformance, rising interest rates, equity market pressure and trade policy. Although the latest economic reports were decent with consumer price growth rising and consumer spending growing at its fastest pace in 5 months, core demand growth is not as impressive. But more importantly, Federal Reserve officials are growing less hawkish with Chair Powell expressing concerns about next year’s headwinds last week and Vice Chair Clarida adding that there is some evidence of global slowing and they need to factor in the global outlook. Clarida in particular does not expect a big increase in inflation this year. With that in mind, both central bankers are still confident enough in the domestic economy to proceed with a December rate hike but there’s a good chance that it will be accompanied by a less hawkish outlook. Sterling will continue to be one of the biggest stories as we wait to see if there will be a no confidence motion on Prime Minister May. Last week, the British pound dropped more than 1.5% in one day as Prime Minister May’s Brexit deal dissolves into flames. The prospect of a general election ahead of the Brexit deadline in March would only create more chaos in what is already a highly volatile situation. The initial reaction in the market would likely send cable towards the 1.2500 level. Data has also been terrible with CPI growth easing and retail sales falling. If this data trend continues, it will be difficult for GBP to sustain any recovery. Despite all of the UK’s troubles, it was a great week for the Euro, which closed above the 20-day simple moving average for the first time in over a month. The currency was completely unfazed by last week’s softer economic reports including Germany’s ZEW survey, Q3 GDP and Eurozone trade balance. Euro traded almost exclusively on anti-dollar flows and risk appetite and we expect the same in the coming week as the currency looks past any weakness in Germany’s PPI report or Eurozone PMIs. With stocks recovering and the dollar turning lower, we see EUR/USD hitting 1.15 and possibly even 1.1550. All 3 of the commodity currencies traded higher on Friday with the Australian hitting a 2 month high and the New Zealand dollar hitting a 4 month high.

 

 

Time(GMT)   Economic Release IMP Actual Forecast Prior
00:01 U.K Rightmove House Prices (YoY) (NOV) Medium     0.9%
01:10 BOJ Outright Bond Purchase 1~3 Years Low      
03:30 BOJ Kuroda speaks at EuroPlus in Tokyo High      
09:00 Euro-Zone Current Account s.a. (euros) (SEP) Low     23.9b
09:00 Switzerland Total Sight Deposits CHF (NOV 16) Low     577.2
10:00 Euro-Zone Construction Output w.d.a. (YoY) (SEP) Low     2.5%
15:00 U.S NAHB Housing Market Index (NOV) Medium   67 68
15:45 U.S Fed’s Williams Speaks in Moderated Q&A in the Bronx Low      

 

Euro

The single currency gained in Friday’s session as the Euro zone inflation rose in October at its fastest pace in nearly six years, driven by energy prices, the European Union statistics agency said on Friday, confirming its earlier estimate. The core inflation measure which excludes energy and food was revised down. Overall, the EUR/USD traded with a low of 1.1320 and a high of 1.1418 before closing the day around 1.1416 in the New York session.

 

Yen

The Japanese Yen pair fell broadly on Friday in the wake of cautious comments from two U.S. Federal Reserve officials about global economic growth, while sterling rose following losses tied to fears about a Brexit deal. The greenback fell to one-week lows versus the euro and a two-week trough against the yen following comments from Fed Vice Chair Richard Clarida. Overall, the USD/JPY traded with a low of 112.62 and a high of 113.61 before closing the day around 112.84 in the U.S session.

 

British Pound

The British Pound rises against the euro and the dollar after suffering the biggest one-day sell-off since 2016 on Thursday. Sterling has not fully recovered its losses, but it has had a much better day, particularly against the dollar. Investors are bracing themselves for the twists and turns to come, as Theresa May fights to keep her Brexit plan. Overall, the GBP/USD traded with a low of 1.2758 and a high of 1.2875 before closing the day at 1.2830 in the New York session.

 

Canadian Dollar

The Canadian Dollar strengthened to its highest in more than one week on Friday, extending this week’s gain as the greenback broadly fell and domestic data showed that factory sales edged higher in September. The U.S. dollar fell broadly in the wake of cautious comments from two U.S. Federal Reserve officials about global economic growth.  Overall, USD/CAD traded with a low of 1.3124 and a high of 1.3184 before closing the day at 1.3149 in the New York session.

 

Australian Dollar

The Australian Dollar continues to hang tough against its US cousin, holding still above the long downtrend line that had held sway for much of this year, until November 1 indeed. AUD/USD may manage to stay around current levels in the week ahead, assuming the overall risk appetite that tends to favor the Aussie holds firm. Overall, AUD/USD traded with a low of 0.7248 and a high of 0.7334 before closing the day at 0.7333 in the New York session.

 

Euro-Yen

EUR/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is giving a bearish tone and MACD is issuing a bullish stance. The Relative Strength Index is above 48 and lies below the neutral zone. In general, the pair has gained 0.11%.

 

Sterling-Yen

Currently, GBP/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish tone and MACD is indicating a bullish stance. The Relative Strength Index is above 41 reading and lies below the neutral zone. On the whole, the pair has lost 0.21%.

 

Aussie-Yen

Currently, the cross is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 64 reading and lies above the neutral region. In general, the pair has gained 0.12%.

 

Euro-Sterling

This cross is currently trading above 14, 50 and below 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bearish signal. The Relative Strength Index is above 61 and lies above the neutral region. On the whole, the pair has gained 0.32%.

  

Sterling-Swiss

This cross is trading above 14 and below 50, 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is also indicating a bearish tone. The Relative Strength Index is above 41 and lies above the neutral region. In general, the pair has lost 0.24%.

 

Appendix

  

FOREX Closing Prices for November 16, 2018
Currency Open High Low Close Net Chg
EUR/USD 1.1327 1.14187 1.13202 1.14169 0.0091
USD/JPY 113.612 113.615 112.624 112.847 -0.7780
GBP/USD 1.27724 1.28758 1.27589 1.28306 0.0058
USD/CHF 1.00616 1.00856 0.99896 0.99945 -0.0070
USD/CAD 1.31789 1.31843 1.31248 1.31498 -0.0026
EUR/JPY 128.696 128.87 128.1 128.849 0.1370
GBP/JPY 145.175 145.421 144.571 144.804 -0.3040
CHF/JPY 112.896 112.911 112.166 112.875 0.0170
AUD/JPY 82.649 82.786 82.083 82.757 0.0980
EUR/GBP 0.88604 0.89028 0.88224 0.88961 0.0028
EUR/CHF 1.13967 1.14319 1.13929 1.14122 0.0010
GBP/CHF 1.28554 1.29451 1.2811 1.28257 -0.0031

 

 

Daily Pivot Points
  Trading Range  
Contract S3 S2 S1 Pivot R1 R2 R3
EUR/USD 1.1253 1.1287 1.1352 1.1385 1.1450 1.1484 1.1549
USD/JPY 111.45 112.04 112.44 113.03 113.43 114.02 114.42
GBP/USD 1.2651 1.2705 1.2768 1.2822 1.2885 1.2939 1.3002
USD/CHF 0.9865 0.9927 0.9961 1.0023 1.0057 1.0119 1.0153
USD/CAD 1.3062 1.3093 1.3122 1.3153 1.3181 1.3212 1.3241
EUR/JPY 127.57 127.84 128.34 128.61 129.11 129.38 129.88
GBP/JPY 143.59 144.08 144.44 144.93 145.29 145.78 146.14
CHF/JPY 111.65 111.91 112.39 112.65 113.14 113.40 113.88
AUD/JPY 81.60 81.84 82.30 82.54 83.00 83.25 83.70
EUR/GBP 0.8764 0.8793 0.8845 0.8874 0.8925 0.8954 0.9006
EUR/CHF 1.1354 1.1373 1.1393 1.1412 1.1432 1.1451 1.1471
GBP/CHF 1.2642 1.2727 1.2776 1.2861 1.2910 1.2995 1.3044

 

Sources:  News, Charts & Quotes (Courtesy: Reuters, US Department Of Treasury)

 

Disclaimer

This information has been prepared for information only and does not constitute an offer or commitment. This information does not constitute investment advice as defined by the rules of the FCA.

The firm or its staff members may trade on their own account and may from time to time hold or act as market makers in investments mentioned in this document. Please note that the firm makes no warranty, expressed or implied, as to the accuracy or completeness of the information and opinions herein. All parties are advised to seek independent professional advice as to the suitability of any products and to their tax, accounting, legal or regulatory implications. City Credit Capital (UK) Ltd is authorized and regulated by the Financial Conduct Authority, reg 232015.