Weekly Forex Update The greenback registered gains against its key peers last week, as strong economic data from the US combined with Federal Reserve (Fed) policymakers latest comments reinforced expectations that the US central bank would raise interest rates sooner than expected. The minutes of the latest US Fed policy meeting revealed that few policy makers were of the opinion that it would be appropriate to unwind the accommodative measures at an earlier than envisaged period. In economic news, the Conference Board reported that its leading economic index in the US showed a bigger than expected increase in July, while the survey report by the Federal Reserve Bank of Philadelphia showed that regional manufacturing activity unexpectedly accelerated in August. Additionally, the Markit preliminary manufacturing report showed that the pace of domestic industrial activity reached a multi-year high in August. Existing home sales in US surprisingly rose to a ten-month high in July, suggesting that the housing market in the nation is gaining traction. Moreover, initial jobless claims in the US fell more than expected in the week ended August 16. A separate report revealed that the consumer price index in the US rose by 0.1% in July, in line with market expectations and after rising 0.3% in June. Meanwhile, the Fed Chair, Janet Yellen’s speech to fellow central bankers and others took center stage on Friday, as she indicated that the US economy is recovering and added the labor market is improving as well. She further indicated that the rise in the key interest rates could come earlier than expected if the US economic recovery is sustained. Also, the European Central Bank (ECB) President, Mario Draghi on Friday indicated that he is confident that the stimulus measures announced in June will provide boost to region’s economy. He added that the central bank stands ready to adjust policy stance further and will take more actions to anchor inflation expectations and stimulate demand. In a noteworthy event, Moody’s Investor Service warned that France is likely to miss its fiscal targets in 2014 and 2015 because of significant growth shortfall. Elsewhere, the Bundesbank cautioned that the German economy could struggle to regain momentum as escalating global tensions are dampening the outlook for Europe’s largest economy. The Bank of England minutes released last week indicated that two policymakers, Martin Weale and Ian McCafferty, voted for an immediate rise in the key interest rate to 0.75%, while the rest of the policymakers decided to keep the key interest rate at record low levels. Other riskier currencies, the Loonie, the Aussie and the Kiwi Dollar lost ground against the greenback, after the minutes of the latest Fed policy meeting strengthened prospects of a sooner than expected interest rate hike in the US. EUR USD Last week, the EUR traded 1.19% lower against the USD and closed at 1.3242, following comments from the ECB President, Mario Draghi and as mostly disappointing macroeconomic data from the region continue to heighten concerns over an economic revival in the bloc. The preliminary estimate from the European Commission showed that consumer confidence in the Euro-zone deteriorated more than expected in August. Manufacturing PMI in France and Euro-zone surprised markets on the downside. However, manufacturing activity in Germany expanded at a faster than expected pace in August. Services PMI in Euro-zone fell, while the German and French services PMI rose more than expected in August. Moreover, construction output in Eurozone declined for the second straight month in June. The current account surplus in the region fell to a seasonally adjusted €13.1 billion in June from €19.8 billion in May. Meanwhile, the ECB chief, Mario Draghi stated at the Jackson Hole gathering on Friday that the central bank is ready to take more unconventional action if needed to stimulate a sluggish Euro-zone economy. During the week, the pair traded at a high of 1.3400 and a low of 1.3220. The pair is expected to find its first support at 1.3175, with the next support expected at 1.3107. The first resistance is at 1.3355, and the next at 1.3467. The common currency is expected to take further cues from the outcome of the preliminary inflation and manufacturing data for August from Eurozone and its member nations. Additionally, employment data from Germany will also remain crucial. GBP USD In the last week, GBP traded 0.72% lower against the USD and closed at 1.6572, as the greenback strengthened following the hawkish Fed meeting minutes. The GBP also came under pressure following the release of disappointing economic data. Data revealed that annual retail sales in the nation grew at its slowest pace since November 2013 in July, suggesting that consumer demand slowed during the start of the third quarter of 2014. Another report revealed that consumer price inflation in the nation eased more than expected and remained below the BoE’s 2% target rate. Additionally, data released by Office of National Statistics indicated that house prices in the UK surprisingly dropped in July. However, the Pound gained earlier after the BoE minutes revealed that two policymakers voted for an immediate rate hike, marking the first split in more than three years. The other policymakers voted to hold the benchmark interest rate at 0.50%, as they were of the opinion that an earlier rise in rate could leave the economy “vulnerable to shocks”. The pair traded at a high of 1.6739 and a low of 1.6561 in the previous week. GBPUSD is expected to find its first support at 1.6509, with the next at 1.6446. Resistance exists first at 1.6687, and then at 1.6802. Ahead this week, traders would focus on the UK housing and consumer confidence data. USD JPY The USD traded 1.55% higher against the JPY over the past week, closing at 103.95, following comments from the Fed chief, Janet Yellen who started the central bank annual symposium in Jackson Hole, with the observation that conditions in labor markets have outperformed Fed’s forecasts and that if this continues the Fed may raise interest rates earlier than expected. In economic news, Japan posted a merchandise trade deficit of ¥963.99 billion in July, remaining in the red for a record 25th consecutive month. All industry activity declined more than expected in June, amid contraction in industrial production. Supermarket sales after adjustment fell by a seasonally adjusted 2.1% (YoY) in July after posting a 2.8% drop in June. However, manufacturing PMI rose more than expected in August. Japans leading index rose more than initially estimated in June. The pair traded at a high of 104.21 and a low of 102.25. The pair is expected to find its first support at 102.73, with the next support expected at 101.50. The first resistance is at 104.69, and the next at 105.43. In Japan, consumer price inflation data later this week will be in focus. Additionally, market participants would also keep a tab on unemployment rate, industrial production, retails sales and housing data in Japan. USD CHF USD traded 1.24% higher against the CHF and closed at 0.9138 in the last week, as the hawkish sentiments began to spread among the Fed policymakers, following a speech by central bank Chair, Janet Yellen in which she highlighted the development in the nation’s labor market. In economic news, data from the Federal Customs Administration showed that Switzerlands trade surplus increased notably in July, as imports declined sharply. Trade surplus rose to CHF 3.98 billion in July from CHF 1.4 billion in June. Exports grew 0.2% (MoM) in July, while imports slumped 10.2% (MoM), reversing the 10.8% rise recorded in June. On an annual basis, exports rose 4.5%, while imports declined 4.6% in July. Another report by the Swiss National Bank showed that the M3 money supply rose 3.5% (YoY) in July, following the 4.1% growth in June. During the period, the pair traded at a high of 0.9155 and a low of 0.9025. The first support is at 0.9057, and the next at 0.8976. Resistance exists first at 0.9187, and then at 0.9236. In the week ahead, the UBS consumption indicator and the KOF leading index will be key for the Swiss Franc against the majors. USD CAD Last week, the USD traded 0.42% higher against the CAD and closed at 1.0943, as data released last week in the US showed an improving macroeconomic trend in the nation. The Canadian Dollar also came under pressure following the release of mixed set of economic data from Canada. Data revealed that consumer price index (CPI) in Canada fell 0.2% (MoM) in July, compared to an expectations for a 0.1% fall and after a 0.1% rise in June. Core CPI slipped 0.1% in July, confounding expectations for a flat reading and following a 0.1% fall recorded in the previous month. A separate report revealed that retail sales in Canada rose 1.1% (MoM) in June, exceeding expectations for a 0.6% rise. Core retail sales advanced 1.5% in June, more than the expected 0.3% rise and after a 0.3% gain in May. USDCAD traded at a high of 1.0988 and a low of 1.0872 in the previous week. The first support is at 1.0881, with the next at 1.0818. The first resistance is at 1.0997, while the next is at 1.1050. Separately, in a noteworthy development, Fitch reaffirmed Canada’s credit rating at “AAA” earlier last week. Moving ahead, investors would focus on the second quarter growth data from Canada. AUD USD AUD traded 0.05% lower against the USD last week, and closed at 0.9317, as the greenback strengthened and after the minutes of the Reserve Bank of Australia’s (RBA) latest policy meeting flagged a “significant degree of uncertainty” about the nation’s growth outlook. The minutes also revealed that the RBA would maintain its interest rate for foreseeable future. The AUD was also pressurized, after China, Australia’s biggest trading partner, reported that manufacturing activity in the nation unexpectedly fell more than expected to a three-month low in August to 50.3, easing from July’s 18-month high of 51.7. Meanwhile, the RBA Governor, Glenn Stevens, in his testimony, indicated that economic growth rate in the nation is expected to be close to the trend, but a bit slower. He further mentioned that key interest rate will be held at its current low for some time. Economic data from Australia indicated that the Conference Board’s leading economic index rose 0.4% in June, following a 0.2% increase in the previous month. The Westpac leading index fell 0.1% (MoM) in July, compared to a rise of 0.1% in the previous month. During the week, the pair traded at a high of 0.9347 and a low of 0.9237. The first support is at 0.9254, and the next at 0.9190. The first resistance is at 0.9364, and the next at 0.9410. Market participants would focus on the private sector credit, new home sales and construction data from Australia ahead in the week. Gold In the prior week, Gold traded 1.99% lower against the USD and closed at USD1280.20, as speculation over an early interest rate hike following the latest Fed minutes earlier last week weighed on the precious metal. Meanwhile, at the annual Jackson Hole symposium, the Fed, chief Janet Yellen indicated that interest rate hike could come sooner than expected if the US economic recovery is sustained. The yellow metal traded at a high of 1304.90 and a low of 1273.40 in the previous week. Gold is expected to find support at 1267.43 and the next at 1254.67. The first resistance is at 1298.93, while the next is at 1317.67. In the week ahead, traders would focus on the US economic data for further indications on the strength of the economy and the possible future path of monetary policy. Crude Oil Despite upbeat economic data from the US and a bigger than expected decline in US crude oil stockpiles last week, oil prices traded 3.80% lower against the USD and closed at USD93.65, amid demand growth concerns and on speculation that turmoil across the Middle East would not threaten crude supplies. Renewed concerns of a slowdown in China, following disappointing manufacturing PMI data and the resumption of oil shipments from Libya weighed on crude oil prices. The US Dollar rallied on Friday, after Fed Chair, Janet Yellens remarks at Jackson Hole were construed as hawkish, as she indicated that an increase in interest rates could come sooner than expected if the US data on inflation and the labor market shows consistent and continuous improvement. On the US oil inventory front, the Energy Information Administration (EIA) reported the oil stockpiles declined more-than-expected 4.5 million barrels for the week ended August 15. The American Petroleum Institute (API) reported 1.4 million barrel decline in crude stocks in the similar period. Oil traded at a high of 97.05 and a low of 92.50 in the previous week. Oil has its first major support at 91.75, while the next support exists at 89.85. The first resistance is at 96.30, and the next at 98.95. The global macroeconomic data would remain a key catalyst in this week’s market action. Happy Trading...
Posted on: Mon, 25 Aug 2014 10:22:04 +0000
Trending Topics
Recently Viewed Topics
© 2015