Weekly Currency Review: Fed’s Hawkish Tone Boost Greenback; Dollar Takes Over Yen As A Safe Haven In Trade War
Weekly Currency Review
DXY Index Price Chart: 5-minute Timeframe (from July 12 to July 19, 2018). Source: Tradeview.com
The US retail sales data released this Monday showed 0.5 percent rise in June, and last month’s spending growth was revised to 1.3 percent from 0.8 percent, confirming the accelerating consumer spending in the second quarter.
Federal Reserve Chairman Jerome Powell maintained an upbeat outlook for the U.S. economy during his semiannual testimony before the Senate Banking Committee on Tuesday. The prospect on continuing to raise interest rates still remains strong despite the uncertainty over Trump administration’s trade policy. The DXY remained indifferent to an upward revision in the Atlanta Fed GDP Now estimate and softened before the testimony, closed at 94.27 on Monday, but surged further because of Powell’s hawkish tone. At the time of writing, the index is traded beyond 95.
Dollar strengthened against GBP ahead of incoming Brexit
The GBP/USD pair fell to a 10-months low level on Wednesday after the data showing that UK’s inflation grew at a rate of 2.4% in June, falling short of expectation and diminishing chances for interest rate hike by the Bank of England. Before the inflation figures, the employment data released showing a record high job creation while the wage growth slowed to a weaker rate compared to the past months. Theresa May’s leadership remains challenged as David Davis, Britain’s chief Brexit negotiator resigned late Sunday. And the divisions in UK’s government over incoming Brexit prompted raised political uncertainty and prompted more bearish market sentiment.
GBP/USD Index Price Chart: 5-minute Timeframe (from July 12 to July 19, 2018). Source: Tradeview.com
A mixed week for Euro
Euro weakened against major counterparts ahead of the release of Eurozone CPI, closing at 1.1611 on Wednesday. The final data reached 2.0% on a yearly base in June, while the core annual inflation came in at 0.9% which fell short of the expectation of 1%. And in reaction to Fed’s hawkish comments about the US economy strength, the EUR/USD pair slumped to a three-week low. Some eastern European countries are eyeing on the adoption to the common currency zone. Bulgaria has made progress on meeting the formal criteria and other countries like Croatia and Romania are putting forward plans. On Wednesday, US published June’s homebuilding and housing statistics-both housing starts and building permits dropped by a lowest level in past two or three years, showing the downside pressure on both sides of the housing market. The residential investment data could have impact on economic forecast for the second quarter. In short term, the pair price will test the retracement zone at 1.1650.
EUR/USD Index Price Chart: 5-minute Timeframe (from July 12 to July 19, 2018). Source: Tradeview.com
Yen lost its charm as a safe haven
The USD/JPY pair tumbled as China’s response to US tariffs. The Yen’s attractiveness as a safe haven has decreased as currently traders seemed to prefer US dollar. The pair price climbed above 113 for the first time since January on Wednesday. As a response to growing concerns about protectionism, on Tuesday, Japan signed a free trade agreement with EU In the US, which eliminates most tariffs between the EU and Japan, especially those on Japanese car and European food. The Japan’s trade balance would have impact on the currency movements in the short run. In the long term, Yen still remains downturn pressure against US dollar as market expected wider interest rate gap between the two countries.
USD/JPY Index Price Chart: 5-minute Timeframe (from July 12 to July 19, 2018). Source: Tradeview.com
USD/ARS Index Price Chart: 1-hour Timeframe (from April 17 to April 17, 2018). Source: Tradeview.com
On April 17th, I Know First issued 3-month forecast for the currencies. During the prediction period, I Know First Algorithm gave USD/ARS a signal of 13.08 with the predictability of 0.45, suggesting we have very strong confidence that this pair would surge and gave bullish view on dollar against Argentina Peso. we gave GBP/USD a signal of -0.92 with the predictability of 0.58, suggesting we had bearish view on this pair and indicated that pound would fall against dollar. The actual movement was -8.53%, which mirrored our forecast. Our algorithm also successfully predicted EUR/USD movement based on algorithms by providing a signal of -1.06 and a predictability of 0.37. The actual movement of this pair was -5.81% in the forecasting time period.
Algorithmic traders utilize these daily forecasts by the I Know First market prediction system as a tool to enhance portfolio performance, verify their own analysis and act on market opportunities faster. This forecast was sent to current I Know First subscribers.
How to interpret this diagram
Algorithmic Currency Forecast: The table on the left is the forex forecast for the forex outlook produced by I Know First’s algorithm. Each day, subscribers receive forecasts for six different time horizons. Note that the top 54 currencies in the 1-month forecast may be different than those in the 1-year forecast. In the included table, only the relevant currencies have been included. The boxes are arranged according to their respective signal and predictability values (see below for detailed definitions). A green box represents a positive forecast, suggesting a long position, while a red represents a negative forecast, suggesting a short position.
Forecast Performance: The table on the right compares the actual currency performance with I Know First’s prediction. The column titled “Forecast” shows which direction the algorithm predicted, and the column “% Change” shows the actual currency’s performance over the indicated time period. The “Accuracy” column shows a “v” if the algorithm correctly predicted the direction of the stock or an “x” if the forecast was incorrect. The “I Know First Hit Ratio” represents the algorithm’s accuracy when predicting the trend of the currency.
Signal: This indicator represents the predicted movement direction/trend; not a percentage or specific target price. The signal strength indicates how much the current price deviates from what the system considers an equilibrium or “fair” price.
Predictability: This value is obtained by calculating the correlation between the current prediction and the actual asset movement for each discrete time period. The algorithm then averages the results of all the prediction points, while giving more weight to recent performance. As the machine keeps learning, the values of P generally increase.
Please note-for trading decisions use the most recent forecast. Get today’s forecast and Top stock picks.
