Tag Archives: FX

Three Musketeers of the Foreign exchange

Three Musketeers of the Foreign exchange, the foreign exchange market is one of the most interesting and complex markets in the world.

 

Topics
EUR/USD
GBP/USD
Natural Gas

 

 

 

 

 

 

EUR/USD

 

It is also one of the largest, with a daily turnover of over $5 trillion.
This makes it a very attractive market for investors.
There are many different factors that can affect the foreign exchange market,
such as economic indicators, political events, and even natural disasters.
This makes it a very volatile market, which can be both good and bad for investors.

The long-term trend for EUR/USD is still very much intact
and the recent move higher has simply brought it back to a key resistance zone.
This zone is formed by the 38.2-50% Fibonacci retracement level of the previous major sell-off and as such,
it represents a significant barrier for further upside.

With that said, there are still plenty of reasons to be bullish on EUR/USD in the longer term.
The main one is that the fundamental backdrop remains supportive of a stronger euro.
So, while we may see some near-term consolidation or even a corrective pullback from here,
any weakness should be seen as an opportunity to buy into this market with an eye on further gains over the coming months.

 

 

GBP/USD

 

The GBP/USD currency pair is currently breaking above the key 50% Fibonacci resistance level,
which is a significant development that could undermine the long-term bearish wave analysis.
This recent move higher in the GBP/USD has been driven by a number of factors,
including increasing optimism over a Brexit deal and strong economic data from the UK.
In addition, the US dollar has been under pressure recently due to concerns about trade and economic growth.

As a result of this breakout, we believe there is now
upside potential for the GBP/USD towards 1.3500 in the near term.
This would be important to watch as it represents previous highs from earlier this year.
with the GBP/USD currently testing a critical zone that could determine the next major price swing.
A break or bounce at this level is critical for investors to watch.
On the one hand, a bullish continuation followed by a bull flag pattern indicates a wave 345 (orange) pattern.
This would mean further upside potential in the currency pair.

However, on the other hand, a strong bearish bounce could still indicate an
ABC (yellow) within a complex WXY (pink) of a larger wave 4 (grey).
This would point to more downside potential in the pair.

Which scenario do you think is more likely?
What are your thoughts on the GBP/USD at this key juncture?

 

 

 

 

 

Natural Gas

 

The market has been bearish on NGAS for some time now,
but the recent move up to the key -61.8% Fibonacci target has investors wondering if this is finally the bottom.
While it is still too early to say for sure, there are a few things that
suggest that NGAS may finally be ready to turn around.

First of all, the move up to the -61.8% target was much stronger than expected,
suggesting that there is still some buying interest in this market.
Secondly, the volume has been steadily increasing over the past few days as well,
which could indicate that more and more investors are taking positions in NGAS.
Finally, price action has been relatively stable over the past few days,
which suggests that buyers are starting to gain control of this market.
Of course, only time will tell whether or not NGAS can continue its upward momentum and reach new highs.
However, if these three factors are any indication of what’s to come then we
could see some serious upside potential in Natural Gas prices in the near future!

The NGAS has completed a 5-wave pattern in wave C of a larger wave X.
Price action has reached the -61.8% Fibonacci target which is a crucial level.
A bearish breakout below the support zone could indicate a decline towards the Fibonacci targets.
The bearish breakout could confirm a new bearish 5-wave pattern

One of the most important things to remember when investing
in the foreign exchange market is to diversify your portfolio.
This means investing in multiple currencies so that if one currency declines in value,
you have other investments to offset any losses.

 

 

 

USD/CAD pair weekly decline

USD/CAD pair weekly decline, The USD/CAD pair remains under some selling pressure for the fourth successive day on Friday and drops to a fresh weekly low heading into the European session.

 

Topics
The after-effect of President Trump
The US-Canada Trades
The COVID-19 worsening in China

 

 

 

 

 

The after-effect of President Trump

 

Spot prices, however, manage to hold above the 1.3300 round-figure mark
and remain at the mercy of the US Dollar price dynamics.
The Canadian Dollar continues to be weighed down by concerns
over trade relations with the US after President Trump
announced plans to impose tariffs on Canadian steel and aluminium imports.
The move sparked fears of a potential trade war between the two countries,
which could weigh heavily on Canada’s export-dependent economy.
Meanwhile, data from Friday showed that inflation in Canada ticked higher in March as energy prices rose sharply.
However, core inflation remained well below 2%,
suggesting that there is little pressure on businesses to raise prices.
This could keep a lid on any further gains in CAD rates in the near term.

The minutes from the most recent Federal Open Market Committee (FOMC) meeting were released on Wednesday
and showed a more dovish assessment of the economy than expected.
This has weighed on the US dollar and is seen as a key factor acting as a headwind for the USD/CAD pair.

The minutes showed that members were concerned about downside risks to growth,
including trade tensions and slowing global growth.
In addition, members noted that inflation remains muted despite stable labour market conditions.
As a result, many members felt that it was appropriate to keep interest rates unchanged at this time.

This dovish tone is weighing on the US dollar and helping push the USD/CAD pair lower.
The pair is trading near 1.3250, which is just above its lowest level in nearly two weeks.
With no major data releases scheduled for today,
we could see further downside in the pair if traders continue to sell the US dollar.

 

 

 

 

 

The US – Canada Trades

 

 

The Fed raised rates by 25bps at their December meeting, which was widely expected.
However, what wasn’t expected was that they would signal a slower pace of hikes in 2019.
This has led to a lot of speculation about what the Fed is up to.

There are a few possible explanations for why the Fed might be slowing down its rate hiking cycle.
One possibility is that they want to avoid spooking markets and causing a sell-off.
Another possibility is that they believe the economy is not as strong as it appears,
and they don’t want to overheat it by raising rates too quickly. Whatever the reason,
this change in tone from the Fed has caught many market participants off guard
and has led to some volatile trading conditions in recent weeks.

However, one thing remains clear: The Fed still intends to gradually tighten monetary policy over time
and we can expect at least one more rate hike in 2019 (most likely at their June meeting).
So, while there may be some short-term turbulence caused by this change in strategy from the Fed,
investors should remain focused on the longer-term outlook
for interest rates which still point to higher levels eventually.
It seems that everywhere you look these days,
there’s some sort of news or commentary about the stock market.
And while a lot of it is positive, there’s also been a fair share of negativity as well.
So, what does all this mean for traders and investors?

Well, first off, it’s important to remember that the stock market is just one part of the overall economy.
There are other factors at play that can impact markets – both positively and negatively.
For example, we’re seeing concerns about the coronavirus outbreak in China weighing on global markets.

 

 

 

 

 

 

The COVID-19 worsening in China

 

This is understandable given the potential implications for global trade and economic growth.
However, it’s important to keep things in perspective,
yes, there are risks associated with the outbreak but so far it seems contained
and its impact appears to be limited (at least so far).

In terms of trading opportunities, this current environment presents both challenges
and opportunities. On one hand, volatility has picked up which can make things more difficult for traders.
The COVID-19 situation in China is worsening by the day,
and this is having a knock-on effect on oil prices.

While the global demand for oil remains strong,
traders are increasingly worried that the outbreak will dent fuel demand in China,
the world’s second-largest consumer of crude.
This is keeping a lid on any further gains for oil, and as a result, the USD/CAD pair.

However, it’s important to remember that while the current situation in China is worrying,
it’s still too early to say how big an impact it will have on global oil demand.
So far, there has been no significant slowdown in other major consuming nations such as the US or Europe.
And with prices already at relatively low levels,
there could be scope for a rebound if fears around COVID-19 start to ease.

 

 

 

Japanese investors dumping the Yen

 

Japanese investors dumping the Yen

 

Japanese investors dumping the Yen, Investors in Japan are increasingly turning to foreign currency deposits as a way to diversify their portfolios and take advantage of higher yields.

 

Topics
Benefits of Foreign Currency
Yen Weakness Impacting Japan
Against the Dollar
What the future holds for the yen?

 

 

 

 

 

Benefits of Foreign Currency

 

Bank of Japan data shows that foreign currency deposits at domestic banks surged 8.3% in the first eight months of this year, to 26.58 trillion yen ($182.38 billion).
This is the highest level since 2015, suggesting that investors are becoming more comfortable investing in overseas markets.

One key reason for this shift is that interest rates remain low in Japan, despite increases by other major central banks around the world.
This has made Japanese government bonds less attractive, especially compared to bonds from countries with higher yields.
For example, 10-year U.S Treasury yields are currently around 4 percentage points higher than equivalent Japanese government bond yields.

Investing in foreign currency deposits offers investors a chance to both diversify their portfolios and earn greater returns on their investment than they would by keeping their money in yen-denominated assets.

In addition, with the Bank of Japan unlikely to raise interest rates any time soon, the appeal of these investments is likely to continue.
The yen has weakened about 7% against the dollar this year and is trading near a two-year low.

 

 

Yen Weakness Impacting Japan

 

Some Japanese investors have been turning to foreign exchange margin trading to bet on further yen weakness.

The value of outstanding margin loans in yen terms hit a record high of $40.3 billion in August, up from $37.6 billion at the end of last year, according to data from the Tokyo Stock Exchange, “Foreign-currency deposits, a focus for relatively long-term investment,
increased along with yen depreciation this year and may have contributed to an extent to this year’s decline in the yen,”
said Lhamsuren Sharavdemberel, Barclays Bank analyst.

Foreign currency deposits have risen in popularity in recent months as the yen has fallen to 24-year lows.

Because retail investors may borrow up to 25 times their funds as leverage, margin trading volume increased to a record 1,229 trillion yen in June.

Given the current context of low-interest rates and prolonged yen weakening, analysts anticipate a significant rise in foreign currency deposits. At the end of June, households had a record 1,102 trillion yen in cash and savings, indicating that there is plenty of idle capital available for investment.

The increase in interest rates comes at a time when Japan’s central bank is attempting to arrest the yen’s slide with harsh interventionist measures.
Japan’s foreign reserves declined to $1.238 trillion at the end of September as a result of these measures, “Most of the increase, of course, is attributable to the change in valuations due to the weaker yen,” he said. But there was a big increase even after adjusting for nominal exchange rate changes in the yen”, said Lhamsuren.

 

 

 

 

 

 

Against the Dollar

 

The yen has been one of the biggest casualties of the dollar’s surge.
It is down 6% against the greenback this year and is now trading at its weakest level since early 2017.
While the yen originally rose following the intervention, it has now fallen back to roughly 145 against the dollar,
back to where it was before Japan’s major currency move.
The Japanese currency had recovered somewhat following intervention by the Bank of Japan in late September,
but it has since given up those gains and is back to where it was before the central bank’s move.

There are a few reasons for the yen’s weakness.
One is that Japan relies heavily on exports, so a strong dollar makes its products more expensive overseas and hurts demand.
The US dollar has been on a tear this year, thanks mostly to interest rate rises by the US Federal Reserve.
As a consequence of a dramatic market decline that has seen the S&P 500 drop 24% since the beginning of 2022, investors have sought refuge in secure assets such as dollars.

Additionally, with interest rates in Japan still near zero, there isn’t much incentive for investors to hold onto yen-denominated assets.
And finally, as China’s currency reserves have declined, there has been less demand for the yen as a funding currency.
The Chinese foreign currency declined from $3.055 trillion in August to $3.029 trillion in September.
Chinese officials blamed the drop on declining asset prices driven by the rising dollar.

 

 

What the future holds for the yen?

 

All things considered; it looks like the yen could continue to weaken against the dollar in the near term.
However, given that Japanese officials are likely to intervene if they feel that further depreciation would be harmful to their economy,
investors should keep an eye on developments in this situation.