Tuesday, 18 December 2018


The Naira entered the final full trading week before Christmas on a steady note despite concerns over plateauing global economic growth weighing on risk sentiment.

It is becoming clear that a weakening Dollar remains one of the drivers behind the Naira’s marginal gains on the parallel exchange. With the Dollar seen depreciating ahead of the Fed meeting as investors remain on the side-lines, emerging market currencies such as the Naira have the opportunity to appreciate further.

However, geopolitical risk factors in the form of lingering trade tensions, Brexit-related uncertainty and political risk in France are seen fuelling risk aversion down the road. If Oil prices continue to depreciate and the Dollar ends up rebounding from the risk-off mood, the Naira will most likely be one of the many casualties.

Dollar weakens despite market caution
The Dollar is struggling to find support from market caution ahead of the Federal Reserve policy meeting this afternoon.

With a rate hike in December already heavily priced in, investors will most likely direct their attention towards the policy statement and press conference for clues on rate timings in 2019. It must be kept in mind that dovish comments from Fed officials and soft economic data have clouded the Dollar’s medium- to longer-term outlook. Buying sentiment towards the Dollar is seen diminishing further if the Federal Reserve implements a dovish hike. Although the Dollar Index is trading near 2018 highs, it does feel like bulls are living on borrowed time. A breakdown below 97.00 could trigger a decline back towards 96.50.

Gold shines ahead of Fed meeting
Gold bulls are poised to remain in the driver’s seat as investors struggle to shake off jitters over global economic growth and lingering trade tensions. A softening Dollar boosted appetite for the yellow metal with prices trading marginally above $1,248 as of writing. With the Dollar likely to remain depressed ahead of the Federal Reserve meeting and risk aversion magnetizing investors to safe-haven assets, Gold has the potential to appreciate further in the near term. Technical traders will be closely observing how prices behave above the $1,240 resistance level. If the upside momentum holds, the next key points of interest will be at $1,250.70 and $1,258 – a level that resides just below the 200 Daily Simple Moving Average. In an alternative perspective, repeated weakness below $1,240 will be good news for bears and should encourage a decline back towards $1,228.00.

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