Daily Market Analysis and Forex News

The first quarter of 2020 will be remembered as one of the most volatile periods across financial markets since 2008 as chaos surrounding the coronavirus outbreak fostered panic, gloom and doom.

In the FX space there were many casualties of the virus pandemic but some currencies were able to shine through the market mayhem.

The biggest winner was the mighty Dollar which appreciated against every single G10 currency excluding the Swiss Franc and Japanese Yen. Investors from all four corners of the world rushed for a sweet piece of the Dollar as global recession fears became a key theme.

As we head into the second quarter of 2020, the Dollar Index (DXY) could push higher if global sentiment fails to improve. Looking at the technical picture, a solid daily close above 99.90 could open a path toward 101.00 and 102.00, respectively.

Japanese Yen eyes Dollar’s throne

Another champion in the FX arena was the Japanese Yen.

In times of uncertainty, investors tend to rush to safety with the Yen acting as one of the hotspots of safety over the past few months.

The USDJPY remains a battleground for the Dollar and Yen as risk aversion supports appetite for both currencies. A breakdown below 107.00 could trigger a decline towards 106.60 and 106.00. Alternatively, a breakout above 109.00 should open the doors towards 111.60.

Euro posts a mixed performance but volatile against USD

The Euro has displayed explosively levels of volatility against the Dollar since the start of 2020. At one point the EURUSD tumbled over 850 pips before rebounding 500+ pips as the coronavirus swept through markets.

Unprecedented measures have been enforced by the European Central Bank to cushion the painful blows inflicted by the coronavirus outbreak. The question is whether this will boost attraction towards the Euro in the second quarter of 2020.

Sustained weakness below 1.1000 could trigger a decline towards 1.0780 and 1.0650. Should 1.1000 act as a reliable support, prices could test 1.1220.

EURGBP tumbles below 0.8900

A tug of war is taking place on the EURGBP as investors grapple with weakness in both the Euro and Pound.

A solid daily close below 0.8800 could open a clean path towards 0.8600. If prices break above 0.8900, the EURGBP could rebound towards 0.9100.

South African Rand tumbles to all-time low

The South African Rand is sulking near all-time lows as investors digest Moody’s latest decision to downgrade the country’s last investment-grade rating.

The local currency has weakened against every single G10 currency year-to-date and shed almost 30% against the Dollar. With investors adopting a cautious stance amid the coronavirus outbreak and global recession fears draining confidence, emerging market currencies like the Rand are positioned to weaken further.

One key question is how much further can the Rand depreciate as we enter the second quarter of 2020? Should the Dollar appreciate on risk aversion, this could compound to the Rand’s woes. Technical traders will continue to observe how the USDZAR behaves above 18.00.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

I could not help but feel a familiar sense of deja-vu from Thursday’s Bank of England (BOE) policy meeting which was a non-event.

The central bank left interest rates unchanged at 0.75% as widely expected, expressed concerns over slowing global growth, trade uncertainty and most importantly Brexit. Despite all these warnings and downgrade to the third quarter growth outlook, the BOE still refused to join the chorus of central banks easing monetary policy.

Should Brexit uncertainty continue squeezing vitality out of Britain, the BOE will be forced to turn on the monetary policy life support to prevent the economy from flatlining.

Sterling offered a muted response to the MPC meeting and rate decision this afternoon. The GBPUSD is trading around 1.2480 as of writing with support found at 1.2400. Prices have scope to push higher in the near term as fears cool over the UK crashing out of the European Union without a Brexit deal on October 31st.

OECD cuts growth outlook to post-crisis low

A darker mood awaits financial markets after the Organization of Economic Cooperation and Development (OECD) lowered its global growth forecast to 2.9% for this year and 3% in 2020.

Escalating trade tensions between the United States and China have sapped investor confidence, compounded to policy uncertainty and dampened risk sentiment across global financial markets. Given how China’s GDP is projected to expand by 6.1% in 2019 and 5.7% in 2020 compared to the 6.6% achieved in 2018, this presents a significant risk for emerging markets, especially those who have fostered close trade ties with China. Decelerating global growth may result in falling demand for crude which is bad news for emerging market energy exporters.

Today’s gloomy report from the OECD could speed up the global monetary easing train as more central banks defend their respective economies from unfavourable macroeconomic conditions.

SARB leaves interest rates unchanged

While central banks across the world are easing monetary policy in the face of trade uncertainty and decelerating global growth, the South African Reserve Bank (SARB) has decided to leave rates unchanged at 6.5% in September.

Although economic conditions in South Africa have improved from the first quarter of 2019 with growth rebounding to 3.1% in Q2, the nation still remains exposed to external risks like many other emerging markets. The explosive appreciation in Oil prices earlier this week and pending rating review by Moody’s on 1st of November may have discouraged the SARB from cutting rates today. Nevertheless, a rate cut remains on the cards in Q4. Investors just need to look at the SARB’s downgraded economic projections for 2020 and 2021 which verify the central bank’s caution. 

The SARB has decided to miss the fast-moving easing train this month. However, it may catch it at a later stop with better seats.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Bitcoin was one of the main talking points across financial markets today after suddenly climbing to its highest level since November 2018 above $5000.

While sudden and explosive swings are nothing new in the world of cryptocurrency, Bitcoin has certainly struggled for direction in recent months as investors evaluated the possibility of its adoption by the mainstream. Although the reason behind Bitcoin’s aggressive 23% jump remains a mystery, it does suggest that bulls could be back in town. In regards to the technical picture, BTCUSD turned bullish on the daily charts after prices rallied from $4200 to just above $5100. With prices trading above the 200 Simple Moving Average and the MACD trading to the upside, lagging indicators suggest that Bitcoin has the potential to push higher. A solid daily close above $5000 will be needed to seal the deal for bulls. Alternatively, if $5000 proves to be a reliable resistance, Bitcoin has scope to retest $4500.

Currency spotlight – GBPUSD

Sterling remained bruised and depressed on Tuesday after UK lawmakers rejected all alternative Brexit options for a second time.

This unfavorable development has created another element of uncertainty and confusion over Brexit at a time where investors are desperately seeking clarity. The United Kingdom now has until  April 12 to either seek a longer extension from the EU, agree on an alternative Brexit plan or leave the EU without a deal in place. Market fears of the UK crashing out of the EU with no deal is likely to weigh heavily on the Pound and this was reflected in the GBPUSD.

Taking a look at the technical picture, the GBPUSD is coming under pressure on the weekly charts. A breakdown below 1.3000 is seen opening a path lower towards the 1.2890 regions.

USDZAR hovers above 14.14

The Rand entered the second quarter of 2019 on a firm footing after Moody’s delayed its credit rate decision on South Africa. Positive data from the United States and China also supported appetite for emerging market currencies, with the Rand falling into this category.

Although the local currency weakened on Tuesday, this has more to do with an appreciating Dollar rather than a change in overall sentiment. If risk sentiment continues to improve on easing global growth fears and domestic data shows signs of stabilizing, the Rand has the potential appreciate against the Dollar.

In regards to the technical picture, the USDZAR is likely to test 14.00 if the 14.14 level is conquered.

Commodity spotlight – Gold

An appreciating Dollar and improvement in risk sentiment have reduced appetite for safe-haven Gold.

Positive economic data from China and the United States has eased investor concerns over slowing global growth, with equities and riskier assets back in focus. While Gold has the potential to sink further in the near term, the medium to longer term outlook remains in favor of bulls. Geopolitical risks in the form of Brexit, uncertainty over US-China trade talks and a dovish Federal Reserve are likely to continue supporting Gold. Focusing on the technical picture, the precious metal is likely to test $1280 in the near term. For bulls to jump back into the game, prices need to break back above the psychological $1300 level.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

A storm is brewing across Turkey's financial markets as the nation desperately struggles to contain another Lira crisis.

Turkish authorities have taken unprecedented measures to prevent Lira volatility by withholding liquidity, with the swap rate rocketing to 1200% on Wednesday. The extremely high borrowing cost makes it almost impossible for foreign investors to sell the Lira just days before the local elections commence. However, when liquidity eventually returns the Turkish Lira is likely to find itself exposed to severe downside shocks.

The absence of liquidity is impacting the USDTRY with prices trading marginally below 5.400 as of writing. In regards to the technical picture, prices are looking bearish on the daily charts with sustained weakness below 5.400 opening a path towards 5.240.

USDZAR breaks above 14.60 

The currency crunch in Turkey has spooked investors with an appetite for emerging market currencies. Buying sentiment towards the Rand deteriorated today as reflected in the USDZAR. The technical picture suggests further upside with a daily close above 14.600 opening a path higher towards 14.658 and possibly higher.

USDMXN eyes 19.40 

The USDMXN jumped considerably today with prices hitting a daily high of 19.37. Prices have scope to push higher if bulls are able to secure a daily close above 19.40.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Buying sentiment towards Rand has unexpectedly brightened today after official reports showed South Africa’s economic growth cooled during the final trading quarter of 2018. The economy grew by 1.4% QoQ in Q4 compared to the 1.6% projection, while the overall momentum of growth dipped below the upwards revised 2.6% achieved during the third quarter of 2018.

With South Africa’s economy growing by an overall 0.8% in 2018, inflation pressures easing and elections looming, the central bank is expected to leave monetary policy unchanged in March. It would be a real surprise if the South African Reserve Bank (SARB) altered monetary policy at a time where changes are not necessarily needed at an immediate level.

The Rand can be influenced by domestic conditions, but I would highlight the risk that external drivers can have in the form of quickly changing the momentum of the currency. Trade tensions are still a massive factor in influencing global markets and this will impact the Rand’s valuation.  With hopes of a US-China trade deal stimulating risk appetite, the Rand like many other emerging market currencies has ammunition to fight against the Dollar.

I would nonetheless emphasize that the global economy remains exposed to a number of different external challenges. It was only this morning that the second largest economy in the world, China reminded the global economy of what impact external headwinds can have on its market, when senior authorities set a growth range of China at 6-6.5% for 2019. This is an estimated lower range of economic growth when compared to both 2018 and 2017 and perhaps more importantly, there was a warning that externally-generated risks and the subsequent pressure this is having on the Chinese economy is increasing. 

The moral of this story to sum up is that all of the economies in the global market are exposed to external pressures this year, and no economy, where developed or emerging can underlook the risks this can have on their own economic growth outlook.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.