Weekly Currency Review: The Dollar Suffers from The Political Developments in the US
EUR/USD
In the weekly currency review the dollar slipped against its Group-of-10 peers, while the yen, seen by many as a haven, gained for a seventh day. The dollar suffers from the latest political developments in the US, as not only the US Federal Reserve cut its rate hikes forecast, indicating that the current level is now at the lower end of the neutral range, but also, US President Trump last Friday refused to sign the budget extension approved by the Senate, triggering a partial US government shutdown. Furthermore, data released last week missed expectations, fuelling concerns about an economic slowdown.
USD/JPY
The USD/JPY broke below 110.90 and tumbled to 110.24, hitting the lowest intraday level since August 22. The pair then bounced modestly to the upside, rising to the 110.40/50 area. It closed on Christmas eve at 110.30.
The US dollar continues to be unable to find support again the yen. It has fallen now 500 pips since December 13. Higher US yields, uncertainty about the US economic outlook and US politics weighs on the US dollar. At the same time, the Japanese yen is stronger amid risk aversion. Wall Street is falling again today after having last week the worst performance since 2008. The Dow Jones was down 1.0%, at the lowest in more than a year. US bond yields were also lower.
GBP/EUR
While GBP/EUR has been subject to bouts of intense volatility and sudden sharp price movements in recent months the pair has nevertheless remained constrained to a 1.10 to 1.16 range since September of 2017, highlighting the abnormality of trading conditions present throughout 2018.
For the Pound Sterling (GBP), Brexit developments and the related political fallout continue to drive market value while political unease in the Eurozone and concerns over the sustainability of the European economic recovery alongside their own Brexit worries have weighed on the Euro, leaving the GBP/EUR exchange rate at the mercy of bilateral uncertainties.
On 18th December, I Know First issued 3-days forecast for the currencies. During the prediction period, I Know First Algorithm gave USD/ZAR a signal of 1.39 with the predictability of 0.15, suggesting we had bullish view on this pair and indicated that the Dollar would gain against the South African Rand. The actual movement was 1.67% which echoed our forecast. Our algorithm also successfully predicted USD/RUB movement based on algorithms by providing a signal of 0.80 and a predictability of 0.27. The actual movement of this pair was 3.28 % in the forecasting time period.
Algorithmic traders utilise 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.
