Weekly Market Watch

Released 27 April 2015 - Weekly Newsletter

Last week recap

Extended its previous week’s gains last week as asset flows favoured the Euro over the Greenback and despite continued concerns over Greece. The rate gained with mostly lower than expected economic data out of both economies. The week began on a soft note, with the rate declining on Monday in the absence of any significant economic data from either the Eurozone or the United States, and after ECB President Draghi said that, “growth projections, as well as inflation expectations - reflected both by outside observers and by ECB staff projections -have been revised upwards. And confidence overall has increased.” The pair then consolidated on Tuesday after making its weekly low of 1.0659 on Tuesday after German ZEW Economic Sentiment printed at 53.3 compared to an expected reading of 55.6, while Eurozone ZEW Economic Sentiment showed a reading of 64.8 versus 63.7 expected. On Wednesday, the rate declined a fraction after U.S. Existing Home Sales showed an annualized +5.19M compared to +5.04M expected. The pair then rallied on Thursday after U.S. Weekly Initial Jobless Claims showed 295K new claims last week compared to an expected 288K, while U.S. New Home Sales came out at 481K versus 514K anticipated. European numbers had French Flash Manufacturing PMI print at 48.4 versus 49.4 expected, with German Flash Manufacturing PMI came out with a reading of 51.9 compared to an expected 53.1. Other Eurozone numbers out on Thursday were the Spanish Unemployment Rate, which hit 23.8% versus 23.5% expected, German Flash Services PMI, printing at 54.4 versus 55.6 expected and French Flash Services PMI, which showed a reading of 50.8 compared to an expected reading of 52.5. The pair then made its weekly high of 1.0899 on Friday after German Ifo Business Climate printed at 108.6, in line with expectations, while U.S. Durable Goods Orders increased +4.0% m/m, significantly higher than the expected +0.7%, nevertheless, Core Durable Goods Orders came in at -0.2% m/m versus +0.2% expected. EUR/USD went on to close the week at 1.0873, showing an overall gain of +0.6% from its previous weekly close.
Gained a fraction last week as Japan reported better than expected trade numbers and with mostly lower than expected economic data out of the United States. The week began with the rate gaining after making its weekly low of 118.52 on Monday, after comments over the weekend by BOJ Governor Kuroda, who said that, “market expectations of interest rates in the coming years are so low, while we expect, as I said, we can achieve the 2 percent inflation target in fiscal 2015 or early fiscal 2016.” He continued saying, “that means that interest rates should gradually go up so ... the Japanese markets could be surprised.” The pair extended its gains on Tuesday despite the Japanese Trade Balance, which showed a flat reading versus an expected deficit of -0.41T with the previous number upwardly revised from -0.64T to -0.57T. The rate continued gaining on Wednesday after a positive U.S. Existing Home Sales number. On Thursday, the pair reversed direction, trading lower after making its weekly high of 120.08 as the United States reported lower employment, housing and manufacturing data. The rate continued its decline on Friday after mixed U.S. Durable Goods Orders releases. USD/JPY closed at 118.95, with a gain of just +0.1% for the week.
Extended its previous week’s gains last week after the BOE’s MPC Meeting Minutes showed unanimous decisions on both interest rates and stimulus measures. The week began with Cable declining on Monday in the absence of any significant economic data out of either country. The rate then made its weekly low of 1.4855 on Tuesday before gaining ground, again with no significant numbers from either country. On Wednesday, Cable rose sharply after the MPC Meeting Minutes for April showed a unanimous decision on both the Official Bank Rate at 0.50% and the Asset Purchase Facility at 375B. The Minutes noted that, “Inflation was likely to turn slightly negative briefly at some point in the coming months and to remain low for the rest of the year, probably requiring further letters over that period. The path of inflation thereafter would depend on the way in which wages and prices responded to developments in the real economy.” The pair continued higher on Thursday despite UK Retail Sales declining -0.5% m/m versus an expected increase of +0.4%, while UK Public Sector Net Borrowing came out at 6.7B, in line with expectations. Cable then made its weekly high of 1.5187 on Friday after mixed U.S. Durable Goods Orders data. GBP/USD closed at 1.5185, with an overall gain of +1.6% for the week.
Gained a fraction last week as the RBA’s Monetary Policy Meeting Minutes showed members thought further interest rate cuts were warranted but that they would wait until economic numbers justified a cut. The rate started the week selling off sharply on Monday after RBA Governor Stevens said that, “The RBA has clearly signalled a willingness to lower interest rates further. The question of whether interest rates should be reduced has to be on the table.” The pair then made its weekly low of 0.7682 on Tuesday after the RBA’s Monetary Policy Meeting Minutes indicated that the bank was ready to lower interest rates in the near future and that, “The US dollar had appreciated a little further on a trade-weighted basis over March, taking the rise since July 2014 to 14 per cent. Over the same period, members observed that both the euro and the Australian dollar had depreciated by around 20 per cent against the US dollar. While the renminbi had both appreciated and depreciated at different times since July 2014, these moves had roughly netted out against the US dollar overall and the renminbi had therefore appreciated noticeably against most other currencies. Members also noted that the Australian dollar had recorded an all-time low against the New Zealand dollar.” On Wednesday, the rate began rallying after Australian CPI increased +0.2% q/q versus +0.1% expected, while Trimmed Mean CPI increased +0.6% q/q as widely expected. The pair continued gaining on Thursday despite Australian NAB Quarterly Business Confidence printing at 0 versus a previous reading of 2. The rate then made its weekly high of 0.7839 after mixed Durable Goods Orders data out of the United States. AUD/USD went on to close at 0.7816, with an overall gain of +0.5% from its previous weekly close.
Extended its previous week’s losses last week as the United States reported mostly lower than expected numbers with very little economic data out of Canada. The week began with the pair consolidating on Monday after comments from BOC Governor Poloz who stated that, “The U.S. economy has great fundamentals, I think it’s going to pop and we’ll have performance there that is a lot stronger than everyone’s expecting. Our biggest risk I think today is the U.S. economy will prove to be quite a bit stronger than most of us are assuming.” The rate then made its weekly high of 1.2304 on Tuesday after Canadian Wholesale Sales declined -0.4% m/m compared to an expected increase of +0.2%. On Wednesday, the pair started selling off after a lower than expected U.S. Existing Home Sales number. The rate then fell sharply on Thursday after lower than expected U.S. manufacturing, employment and housing releases. The pair then made its weekly low of 1.2102 on Friday after mixed U.S. Durable Goods Orders numbers. USD/CAD closed at 1.2181, with an overall weekly loss of -0.5%.
Reversed direction, trading lower last week despite weaker than expected U.S. numbers and with very little economic data out of New Zealand. The week began with the rate declining on Monday after New Zealand CPI declined -0.3% q/q versus an expected -0.2%. The pair then gained a fraction on Tuesday in the absence of any significant economic data out of either country. The pair then made its weekly high of 0.7736 on Wednesday despite a better than expected U.S. Existing Home Sales number. Thursday saw the rate make its weekly low of 0.7535 despite lower U.S. housing, manufacturing and employment data. The pair then consolidated on Friday after mixed U.S. Durable Goods Orders data. NZD/USD closed at 0.7598, with an overall loss of -1.0% for the week.

The week ahead

AUD The Australian economic calendar is rather quiet this coming week, only featuring a speech by RBA Governor on Monday, Import Prices (1.1%) on Thursday, and PPI (0.2%) on Friday. Resistance for AUD/USD is seen at 0.7839/75, 0.7912/37 and 0.8024, with support noted at 0.7682/0.7737, 0.7625/43 and 0.7532/75.

CAD The Canadian economic calendar is rather quiet this coming week, only featuring a speech by BOC Governor Poloz on Tuesday, the RMPI (-1.8%) on Wednesday, and then GDP (-0.2%) and another speech by BOC Governor Poloz on Thursday. Resistance for USD/CAD is seen at 1.2563/1.2619, 1.2428/48 and 1.2304/1.2409, while support shows at 1.2045/1.2102, 1.1802/41 and 1.1666/72.

EUR The Eurozone economic calendar is less active than usual this coming week, featuring CPI data on Wednesday and Thursday. Monday and Tuesday offer nothing notable, so Wednesday starts the week’s highlights off with German Preliminary CPI (-0.1%), EZ M3 Money Supply (4.3%) and EZ Private Loans (0.2%). Thursday’s key events then include German Retail Sales (0.5%), Spanish Flash CPI (-0.7%), Spanish Flash GDP (0.8%), the German Unemployment Change –(14K), EZ CPI Flash Estimate (0.0%), EZ Core CPI Flash Estimate (0.6%), and the EZ Unemployment Rate (11.2%). That concludes the week’s important data, since Friday is a Bank Holiday in France, Germany and Italy. Resistance for EUR/USD is seen at 1.0899/1.0906, 1.1035/52 and 1.1097, with support showing at 1.0848, 1.0712/1.0800 and 1.0659/65.

GBP The UK economic calendar is quieter than usual this coming week, only featuring CBI Industrial Order Expectations (4) on Monday, Preliminary GDP (0.5%) on Tuesday, CBI Realized Sales (26) on Wednesday, and then Manufacturing PMI (54.6) and Net Lending to Individuals (2.6B) on Friday. Resistance to the topside for GBP/USD shows at1.5222, 1.5268, and 1.5315/51, while support for the pair is expected at 1.5164, 1.5053 and 1.4971/93

JPY The Japanese economic calendar is moderately busy this coming week, featuring the tentatively scheduled BOJ Monetary Policy Statement on Thursday. Monday offers nothing notable, so Tuesday starts the week’s highlights off with Retail Sales (-7.4%), and Wednesday is a Bank Holiday. Thursday’s key events then include Preliminary Industrial Production (-3.4%), the tentatively scheduled BOJ Monetary Policy Statement and Press Conference, and the BOJ Outlook Report. Friday’s important data then concludes the week with Household Spending (-11.7%), Tokyo Core CPI (0.5%), and Average Cash Earnings (0.4%). Resistance for USD/JPY currently shows up at 121.84/122.02, 120.08/121.19 and 119.28/62, with support indicated at 118.04/71, 116.87/92 and 115.56/85.

NZD The New Zealand economic calendar is moderately active this coming week, featuring the RBNZ’s Rate Decision on Wednesday. Sunday is a Bank Holiday, and Monday is quiet, so Tuesday starts the week’s highlights off with the Trade Balance (312M). Wednesday’s key events then include ANZ Business Confidence (35.8), the RBNZ’s Official Cash Rate Decision (unchanged at 3.50%), the RBNZ’s Rate Statement, and Building Consents (last -6.3%). That concludes the week’s important events since Thursday and Friday offer nothing notable. The chart for NZD/USD shows resistance at 0.7620/95, 0.7739 and 0.7847/88. On the downside, technical support is expected at 0.7605, 0.7535/72 and 0.7430/92.

USD The U.S. economic calendar is rather active this coming week, featuring the Fed Funds Rate Decision on Wednesday. Monday is quiet, so Tuesday starts the week’s highlights off with CB Consumer Confidence 102.6. Wednesday’s key events then include Advance GDP (1.0%), the Advance GDP Price Index (0.5%), Pending Home Sales (1.1%), Crude Oil Inventories (last 5.3M), the FOMC Statement and Federal Funds Rate Decision (unchanged at <0.25%). Thursday features Weekly Initial Jobless Claims (297K), the Core PCE Price Index (0.2%), the Employment Cost Index (0.6%), Personal Spending (0.6%) and the Chicago PMI survey (50.1). Friday’s important data then concludes the week with ISM Manufacturing PMI (52.1) and the Revised University of Michigan Consumer Sentiment survey (96.1).


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