Archive for August, 2015

EUR/USD
The EURUSD pair had a negative session on Friday as it broke below 1.12 level. With this we feel that EUR may go much lower. This pair will be very choppy at the moment so we will continue to observe it as to enter in this market at the moment may be risky.
Forecast: Initially this week EURUSD broke clearing 1.15 level. This area was resistive and offered the longer term opportunity to the upside. Breaking below 1.12 level can  take the pair much lower. Overall we can say that this market is highly volatile so we must play safe for the coming week.
GBP/USD
GBPUSD fell during the day on Friday but found enough support to turn this back. This shows that the market may break upside but there is the uptrend line that has been resistive for this pair. We have to wait for the selling candles to re enter into this market to continue selling.
Forecast: The GBPUSD pair initially tried to rally during the course of the week, testing the 1.58 level. This is an area that has been resistive in the past, and then as a result the sellers of course were attracted to it. GBPUSD ended up crashing through the 1.54 level during the course of the week, and more importantly through the bottom of the uptrend line that had been supporting this market for some time now. With this we believe that the market will be volatile so we have to opt for short term trading.
AUD/USD
AUDUSD initially fell during the day on Friday, but as you can see turned back around to form a nice-looking hammer. That hammer of course signifies that we should go higher, but we also recognize that there is a lot of noise just above. With this, and the fact that the gold markets look a little bit tight, we feel there might be a short-term buying opportunity, but nothing more than that. We would prefer to stay on the sidelines as this market is risky at the moment.
Forecast: AUDUSD fell slightly during the course of the week, but essentially went nowhere. We recognize that this market is negative overall, but it looks like it’s consolidating in this general vicinity. Once we break down below 0.7040 level then possibly we can go much lower.
USD/JPY
USDJPY rose during the course of the session on Friday as we continue to see strength in this pair.  The pull backs will be the sign of buying opportunities. We believe that eventually this market will head back to the 125 level. We do not see potential for selling this pair.
Forecast: USDJPY fell significantly during the course of the week, testing the 116 level. The market looks as if it is ready to continue the upward momentum. The 125 level above is massively resistive, and if we can finally break above there it would be a longer-term “buy-and-hold” type of situation. We believe that this market will give lot of buying opportunities and though we will not short this pair at all.

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USD/CAD
The USD/CAD pair went back and forth during the course of the day on Monday, but more importantly formed a bit of a hammer. With this we believe that longer term trend will continue. Considering the oil markets continues to show softness, CAD will essentially go much higher.
GBP/USD
GBPUSD fell during the day on Monday, but turned back around and reached the 1.58 level. Thought the market is in up trend but we need to clear 1.58 level in order to long with this pair. And once it breaks this level, it is expected to got to the 1.59 level. We do not see potential for selling this market at all.
AUD/USD
The AUDUSD pair fell drastically on Monday. The support at 0.70 level turned things back and formed a hammer. The market is highly volatile so it is better to stay on the sidelines and wait for some profitable trading opportunities.
NZD/USD
NZDUSD fell on Monday reaching 0.6050 level. Later in the day the market closed at 0.65 level. If we get above 0.6750 then we are definitely buyers at that point of time. We do not see any potential for selling this market as we can see enough support.

China devalued its tightly controlled currency, roiling global financial markets and driving expectations the yuan could be set for further falls.
China’s devaluation may be best seen as a distress signal from Beijing policymakers – in which case the world’s second-largest economy may be far weaker than the 7% a year growth that official figures suggests. China has been trying to engineer a shift from export-led growth to an expansion based on consumer spending – while simultaneously trying to deflate a property bubble.

WHY???

The central bank said it took action because

  • Yuan has been rising in value when market forces indicated it should have fallen.
  • Yuan has been pushed up because its exchange rate is heavily influenced by the US dollar, which has been strengthening on expectations of a hike in US interest rates.
  • But the devaluation is widely seen as a move to bolster the economy which is struggling to achieve its 7 per cent growth target. This move will help exports to improve.
  • Over the weekend, China reported that its exports plunged by an unexpectedly wide margin of 8.3 per cent in July. The currencies of other developing countries have also fallen, making Chinese exports relatively more expensive.

Leading to Currency wars…..

Currencies fell on fears a weaker yuan could threaten other economies in the region that compete with Chinese exports and encourage their central banks to devalue their currencies to stay competitive.
Ironically, while the much-talked-about devaluation of the renminbi has been a mere 2.8% so far, many currencies in Asia and emerging markets (EMs) have seen a far greater depreciation over the same period, as you can see from the chart.
Sierra Leone’s leone slumped 20%, the Kazakhstan tenge plunged 20.17%, while Malaysia’s ringgit, Russia’s rouble, Turkey’s lira and the Mexican peso all fell between 4% and 7%, as you can see from the chart. The Indian rupee, Taiwanese dollar and Vietnamese dong have all declined more than 3% since 7 August.

WIDER ECONOMIC IMPLICATIONS

  • Depreciation of other Asina currencies – It could also result in a new Asian currency war. Yuan devaluation puts pressure on other central banks around the world to push down their own currencies to help their own exporters and to prevent destabilising capital flows.
  • Delay in increase in US interest rate – It could delay a highly anticipated hike in US interest rates by the Federal Reserve. The yuan’s devaluation has put even more upward pressure on the US dollar. Continued dollar strength is problematic for the Fed since it hurts exports and lowers inflation as well as weakens corporate profits.

Affects on Singapore

  • Singapore’s economy shrank by 4% in Q2/2015 due to the SGD’s strength against most of our major export markets which is led by China, Malaysia, Hong Kong, Indonesia, Europe and US.
  • In two days of devaluation, the People’s Bank of China wiped out the Singapore dollar’s relative weakness against the yuan that the MAS engineered for Q3/2015. However the MAS cannot simply follow the China’s move to regain that export edge.
  • While a weaker SGD would stimulate our exports, it also means higher interest rates for homeowners when the U.S. Fed is poised to raise interest rates. The recent Chinese devaluation weakened the SGD and caused the 3-month SIBOR to spike 6.3% in one day.

China may further depriciate Yuan. Such prolonged uncertainties will affect business and consumer confidence, which will slow down consumption and economic activities. If these happen, the broader economy may be further hurt at a time when global outlook remains sluggish.
Singapore slashed the upper end of its previous 2 to 4 per cent annual growth forecast, amid ongoing risks from an uncertain external environment and a slowdown in global trade, and market watchers have cautioned of an equally cloudy outlook in the coming months.
An export-dependent country; a downward pressure on exports can be seen, the Purchasing Managers’ Index readings on new orders and new export orders, which, in turn, will have an impact on production and export figures.
If we take a look at the Singapore dollar nominal effective exchange rate, it has moved towards the bottom of the policy band, suggesting even more loosening of the monetary policy for the economy.

FOREX Technical Analysis for Week Ahead

Posted: August 21, 2015 in Forex

EUR/USD
The EURUSD pair broke higher during the course of the day on Wednesday after initially touching the support level just above the 1.10 level that we had seen during Tuesday’s trading. It seems that the market may reach towards 1.12 level and so we can b buyers with short term pullbacks. The market will be choppy so we have to wait for buying opportunities.
GBP/USD
The GBPUSD pair initially broke higher during the course of the day on Wednesday, but found enough resistance above to turn things back around and form a bit of a shooting star. The shooting star is of course a negative sign, but we also recognize that there is quite a bit of support just below as we have been consolidating for some time. The pair will find a supoort below 1.55 level and may turn back.
AUD/USD
AUDUSD initially broke higher during the course of the session on Wednesday, but found enough resistance near the 0.74 level to turn things back around. With that being the case, the market ended up forming a shooting star which of course is negative. If we break down below then we can reach to 0.7250 level.
NZD/USD
The NZDUSD pair went back and forth during the course of the session on Wednesday, essentially settling for a neutral candle. This neutral candle of course shows a bit of confusion, although the longer-term charts most certainly show that there is a significant amount of bearish pressure on the Kiwi dollar. We can watch this market to get some trading opportunities.