FOREX Weekly Summary

Last week presented interesting opportunities in the foreign exchange market as the dollar reached a 3 week high rallying at 5.1% against the yen and making this its biggest weekly gain against the yen since February 1999. After sales data shockingly came in at 0.6% in June largely surpassing the estimated value of 0.1% set by analysts, the growth is not entirely surprising as this month’s dollar appreciation is being preceded by 2 consecutive months of growth for the Dollar.

The Euro and the British Pound also gained against the Japanese yen, with the Euro gaining 0.6 percent to a 117.75 yen and the pound gaining 0.6 percent to a 141.4 yen, leading to expectations of an intervention from Japan. These developments have led to rumours that the BOJ will deploy “helicopter money”; a system that will allow the central bank to finance government spending.

The notion began gaining prominence after the former Federal Reserve Chairman Ben Bernanke met with Shinzo Abe and Haruhiko Kuroda in a visit to the Bank of Japan earlier this week. The anticipation of “helicopter money” sends the Yen further down, while with the Prime Minister Shinzo Abe readying a spend package that will probably be announced this month, the Bank of Japan is being actively pressured to enlarge monetary stimulus at its rate review on July 28^th – 29^th.

Gold ended its six weeks growth streak against the Dollar after closing its seventh week on July 16^th at 1337.37, a 2.2% dip from its July 10^th open price of 1368.06, despite a reversal to the upside in reaction to another horrible terrorist attack in France; although Chintan Karnani, chief market analyst at Insignia Consultants states that, “It seems terror news does not affect gold or safe havens, Investors are already investing cautiously. Hence there is no mad rush towards safe havens these days.” We all have our theories.



We should note that in March 23^rd 2016 after the terrorist attack in Brussels left people dead and some others injured, Dollar gained against the Euro, shares fell all over the world, but a significant memory was the leap in Gold prices in the early hours of U.S. trading session which preceded a $3.40 gain at $1,247.60 an ounce in April Comex gold contract, and since the November 2015 attacks in Paris, Gold has remained steadily positive opposing its subsequent downtrend. Looking at a weekly Gold chart, you will see Gold rallying for a reversal just around the period of the incident. Some might say the aftermath of terrorist attacks boosts the demand for safe-haven assets like Gold.

For now, gold traders “seem to prefer the racier stock markets over safe-haven assets, and with [some] U.S. data coming in stronger than expected, there is even less desire to bid gold at these still-elevated levels, I think gold is still going to go higher over time, but probably not before a healthy pullback which could well be under way now,” said Fawad Razaqzada, technical analyst at Forex.com.

Meanwhile, the market volatility have mostly reduced as investment tensions over Brexit have seemingly been weakened, which has also led to an increase in the buying of metals.