Weekly Currency Review: US Elections and Brexit Remain Market-Dominating

Weekly Currency Review: US Elections and Brexit Remain Market-Dominating

Greenback is recovering quickly from the US elections

DXY Currency Index Chart (from November 5 to November 10, 2018). Source: Tradingview.com

This week the USD was very volatile due to several reasons, one of them certainly being the uncertainty about the US Elections. After the results came out that the democrats won back the house, the US Dollar fell, but recovered quickly. At the end of the week the US Dollar rose significantly due to a low unemployment rate, that dropped to 3.9%, which was better than expected. The participation rate improved to 71.1%, exceeding the expected 70.9%. These were the main reasons that  contributed to the rally at the end of the week. But in a bigger trend the USD still stays attractive, because of the rising interest rates and the booming economy.

Pound gains high expectations on a Brexit deal

BXY Currency Index Chart (from November 5 to November 10, 2018). Source: Tradingview.com

Once again, the dominating topic in the GBP has been the negotiations for the Brexit. Despite meetings continue and there is still no solution about the Irish border, market players expected a deal between the EU and UK. Due to this, the GBP gained significantly during the beginning of the week and remained the best performer, rallying against the greenback. Nevertheless, the deal between the EU and the UK is not terminated yet, and Antje Praefcke, a foreign exchange analyst at Commerzback says: “I urge caution: there is still resistance within the cabinet. I am so fed up with hearing some amazing news about breakthroughs in the negotiations almost every day, either amongst the fractured British politicians or with the EU, that are then denied shortly afterwards,”. The GBP was on a six-month high in the mid-week but eventually came back what ended in a weekly loss. The Halifax price index, rose by 0.7%, exceeding the expectation of 0.3%.

The EURO remains risky


EXY Currency Index Chart (from November 5 to November 10, 2018). Source: Tradingview.com

The dispute between Brussels and Rom is likely to escalate in the next few weeks and therefore market takers stay cautious with the Euro. The Euro rose during the week mostly due to the US elections, which gave the Euro a boost. But the Euro lost the gains quickly and ended up in a weakly loss. The Euro mainly fell after the European Commission released the autumn economic forecast. They expect a lower economic forecast of 1.9% and 1.7% in 2019 and 2020, compared to 2.5% in 2018. The commission explained the slowdown with the uncertainties in the trade war. Recent data from the EU shows slow growth in the service and manufacturing sectors. On October 24th , I Know First issued 7-days forecast for the currencies. During the prediction period, I Know First Algorithm gave USD/MXN a signal of 0.95 with the predictability of 0.15, suggesting we had bullish view on this pair and indicated that USD would gain against dollar. Our algorithm successfully predicted the movement, which resulted in a return of 5.35%.

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.

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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.

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