26 Nov 2018

FOREX Newsletter

FOREX Newsletter

November 26, 2018

 

Pulse of the Market

·      Risk aversion drove all of the major currencies lower against the U.S Dollar on Friday

·      For the UK, even if EU leaders approve the agreement PM May still needs to sell it to Parliament

·      Italy’s troubles continue to plague the euro which fell to fresh lows against the greenback

·      The Canadian dollar was hit the hardest although a large part of that was of decline in oil prices

 

The biggest story last week was the meltdown in equities that spilled over to currencies. U.S stocks turned negative for the year after erasing all of its gains. This is significant because less than 2 months ago, the S&P 500 was up about 9%. It lost all of that in a matter of a month, recovered briefly and is now back in the red. As a result risk aversion drove all of the major currencies lower against the U.S. dollar. The Canadian dollar was hit the hardest although a large part of that had to do with the decline in oil prices. The Japanese Yen and Swiss Franc were the best performers, which is natural under a risk averse environment while the Australian and New Zealand dollars were the worst. Looking ahead, the last week of November brings a renewed focus on Brexit and trade in the lead up to the EU’s Brexit summit and the G20 meeting. There’s also data on the calendar that could be market moving including Germany’s IFO and unemployment reports, the U.S’ confidence, trade, personal income, personal spending, Q3 GDP revisions, the Fed minutes, New Zealand’s trade balance and Chinese PMIs. Earlier in the week, sterling popped after Prime Minister May managed to secure a deal with the European Union but the agreement does not resolve many of the major issues that put the deal at risk. For the EU, Gibraltar, the Irish backstop and fishing rights are lingering problems that could scuttle the deal. Spain made it clear that they will reject any agreement that leaves them out out of talks involving the status of Gibraltar. Now the UK needs a majority (not all) of the 27 member states to support the agreement but given Spain’s role, the agreement will most likely be amended which could lead to further back and forth to satisfy their concerns. Meanwhile Italy’s troubles continue to plague the euro which fell to fresh lows against the greenback. Last week, the European Commission opened disciplinary measures against Italy for refusing to submit a budget proposal that complies with their rules. EU member states have 2 weeks to agree with the EC’s decision to begin the Excessive Deficit Procedure (EDP) and if they do, the EC will give Italy the opportunity to prepare a response on how they will rein their deficit in and bring it back into compliance with EU rules. Last but not least, the Canadian dollar has been hit hard by the decline in oil prices. Since peaking in the beginning of October, the price of crude has fallen more than 30% with prices dropping to a fresh 1 year low last week.

 

 

Time(GMT)   Economic Release IMP Actual Forecast Prior
00:30 Nikkei Japan PMI Manufacturing (NOV) Medium     52.9
09:00 German IFO Business Climate (NOV) Medium   102.3 102.8
09:00 German IFO Expectations (NOV) Medium   99.3 99.8
09:00 German IFO Current Assessment (NOV) Medium   105.6 105.9
09:30 U.K BBA Loans for House Purchase (OCT) Medium     38505
13:30 U.S Chicago Fed Nat Activity Index (OCT) Low     0.17
14:00 ECB’s Draghi Speak in European Parliament in Brussels High      
18:30 BOE Governor Carney, former Fed Chairman Greenspan Speak High      
21:45 New Zealand Trade Balance (OCT) Medium     -1560m

Euro

The single currency slumped half a percent in Friday’s trading session on signs that economic growth could be slowing across the euro zone with worries about Brexit and Italy’s budget negotiations also weighing on the single currency. Business growth in the euro zone slowed much faster than expected this month. Overall, the EUR/USD traded with a low of 1.1326 and a high of 1.1419 before closing the day around 1.1333 in the New York session.

 

Yen

The Japanese Yen pair put in a mixed performance last week before closing higher. The price action was a little skewed last week due to thin trading conditions because of bank holidays in the United States and Japan. The Forex pair started the week under pressure as investors continued to react to relatively flat U.S consumer inflation data. Overall, the USD/JPY traded with a low of 112.64 and a high of 112.99 before closing the day around 112.90 in the U.S session.

 

British Pound

The British Pound fell sharply against the U.S Dollar on Friday. The British Pound recovered some lost ground against the Euro ahead of the Sunday meeting of EU leaders in the wake of news the UK and the European Commissions had agreed a text on the Political Declaration on future trade negotiations. Overall, the GBP/USD traded with a low of 1.2796 and a high of 1.2880 before closing the day at 1.2812 in the New York session.

 

Canadian Dollar

The Canadian Dollar weakened on Friday, as a further slide in the price of oil offset domestic data showing above-target inflation and increased retail sales. Canada’s annual inflation rate remained above the central bank’s target of 2 per cent for the ninth straight month in October and retail trade volumes climbed 0.5 per cent in September, data showed.  Overall, USD/CAD traded with a low of 1.3182 and a high of 1.3256 before closing the day at 1.3232 in the New York session.

 

Australian Dollar

The Australian Dollar has eased and is on track for its worst weekly performances since early October as a global sell-off in equities took the shine off risk assets. It was down more than one per cent last week. The losses coincided with a global share rout as investors fretted about a possible slowdown in world growth amid policy tightening in the United States and the bitter Sino-US trade war.  Overall, AUD/USD traded with a low of 0.7216 and a high of 0.7255 before closing the day at 0.7230 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 42 and lies below the neutral zone. In general, the pair has lost 0.64%.

 

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 43 reading and lies below the neutral zone. On the whole, the pair has lost 0.51%.

 

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 51 reading and lies above the neutral region. In general, the pair has lost 0.31%.

 

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 52 and lies above the neutral region. On the whole, the pair has lost 0.12%.

 

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 42 and lies above the neutral region. In general, the pair has lost 0.28%.

 

Appendix

  

FOREX Closing Prices for November 23, 2018
Currency Open High Low Close Net Chg
EUR/USD 1.14049 1.14199 1.13262 1.13331 -0.0069
USD/JPY 112.931 112.99 112.641 112.907 -0.0170
GBP/USD 1.28761 1.28808 1.27969 1.28122 -0.0063
USD/CHF 0.99451 0.99784 0.99329 0.99748 0.0026
USD/CAD 1.31898 1.32562 1.31824 1.32324 0.0046
EUR/JPY 128.799 128.896 127.798 127.969 -0.8180
GBP/JPY 145.428 145.505 144.324 144.677 -0.7390
CHF/JPY 113.485 113.628 113.013 113.158 -0.2920
AUD/JPY 81.889 81.949 81.394 81.642 -0.2550
EUR/GBP 0.88548 0.8876 0.8868 0.88424 -0.0011
EUR/CHF 1.13401 1.13525 1.12951 1.13069 -0.0037
GBP/CHF 1.281 1.28204 1.27599 1.27821 -0.0036

  

 

Daily Pivot Points
  Trading Range  
Contract S3 S2 S1 Pivot R1 R2 R3
EUR/USD 1.1206 1.1266 1.1300 1.1360 1.1393 1.1453 1.1487
USD/JPY 112.35 112.50 112.70 112.85 113.05 113.20 113.40
GBP/USD 1.2695 1.2746 1.2779 1.2830 1.2863 1.2914 1.2947
USD/CHF 0.9900 0.9917 0.9946 0.9962 0.9991 1.0008 1.0037
USD/CAD 1.3117 1.3150 1.3191 1.3224 1.3265 1.3297 1.3339
EUR/JPY 126.45 127.12 127.55 128.22 128.64 129.32 129.74
GBP/JPY 142.98 143.65 144.17 144.84 145.35 146.02 146.53
CHF/JPY 112.29 112.65 112.90 113.27 113.52 113.88 114.13
AUD/JPY 80.82 81.11 81.37 81.66 81.93 82.22 82.48
EUR/GBP 0.8840 0.8854 0.8848 0.8862 0.8856 0.8870 0.8864
EUR/CHF 1.1226 1.1261 1.1284 1.1318 1.1341 1.1376 1.1399
GBP/CHF 1.2694 1.2727 1.2755 1.2787 1.2815 1.2848 1.2876

 

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.

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