The past week’s eye grabbing event were the hawkish comments delivered by the Fed Chairwoman, Janet Yellen, who espoused raising interest rates in the coming months if the economy and the labor market remained healthy. She further reiterated the importance of increasing key rate at a gradual pace and stated that the US economy was improving with the unemployment rate close to what many economists associated with “full employment”.
Macroeconomic data indicated that the US economy expanded 0.8%, yet the growth was less than expected in the first three months of 2016, as spending rose in home building and businesses kept a steady increase in the investment for inventories. Further, the new orders for the long lasting American goods surged in April, backed by robust demand in the volatile civilian-aircraft category, albeit persistent weakness was observed in the business spending plans. Meanwhile, the growth in the manufacturing sector in the US slowed in May, as production declined for the first time since September 2009. Moreover, the Markit services Purchasing Managers’ Index eased in May from April, yet stayed in the expansion territory, indicating declining business confidence in the services industry.
Another set of data revealed that the goods trade deficit in the US widened less than expected in April. Moreover, Americans applying for the new unemployment benefits declined during the week to hit a one-month low, suggesting some strength in the labor market.
The Euro ended the week lower on a stronger footing, after the Eurozone’s private sector growth slowed in the first quarter of 2016 and notched a sixteenth month low while the growth in the manufacturing activity slowed to a three-month low in May, as fewer orders were placed and marginal growth was seen in the exports. Meanwhile, the consumer confidence advanced for a second consecutive month, marking its highest level since January. Moreover, the ZEW economic sentiment indicated that the market participants were less confident about Eurozone’s economy. Elsewhere, Germany’s economic growth gained momentum in the first three months of this year, backed by robust demand from the construction sector. Markit survey indicated that the growth picked up in the manufacturing sector in May, with the manufacturing PMI recording its strongest reading for five months. Further, the private sector growth accelerated during the same month, indicating that Europe’s largest economy has extended its robust start to the year into the second quarter. Meanwhile, the ZEW survey on the economic conditions in Germany eased for the first time in three months in May, showing signs of slowing momentum in the economy.
The Pound ended the week on a stronger footing, after data indicated that UK’s economy expanded 0.4% during the first three months of 2016, although growth slowed from its previous comparable period, amid a slump in the manufacturing and construction output. Further, the consumer confidence improved slightly in May despite uncertainty stemming from the upcoming EU referendum.
EURUSD
The EUR weakened against the USD last week, closing 0.97% lower at 1.1115, after Eurozone’s Markit services PMI declined in April, yet stayed in the expansion territory. Moreover, the manufacturing PMI indicated a slowdown in the growth in manufacturing activity while the ZEW survey for economic sentiment eased unexpectedly in May. Meanwhile, the consumer confidence advanced faster-than-expected in May from April. Separately, Germany’s economy expanded 0.7% on a quarterly basis in the first quarter of 2016. Also, the Markit manufacturing PMI advanced more-than-expected in May, while the service sector expanded in May, hitting its highest level so far in this year. Further, the GfK consumer confidence survey rose for the month of June. Additionally, the IFO business climate index advanced in May, while, the IFO economic expectations index surged during the same month. On the other hand, the ZEW survey for the economic sentiment in Germany eased in May. During the previous week, the pair traded at a high of 1.1227 and a low of 1.1111. The pair is expected to witness its first support at 1.1075 and second support at 1.1035, while the first resistance is expected at 1.1191 and second resistance at 1.1267. This week, investors would focus on ECB interest rate decision for further cues. Additionally, the sentiment indices in the Eurozone, consumer price index, retail sales and Markit’s survey on the services & manufacturing PMI will be eyed by the investors. Moreover, the Germany’s unemployment rate, consumer price index and Markit services and manufacturing PMI’s will also be on investors’ radar.
GBPUSD
The GBP advanced against the USD last week, closing 0.83% higher at 1.4623, after UK’s economy expanded 0.4% between the January-March period in 2016. In more economic news, even though the GfK consumer confidence improved in May, it stayed in the negative territory. Meanwhile, the total business investment dropped on a quarterly basis in 1Q 2016. Further, the public sector net borrowing rose more-than-expected in April. Separately, UK’s CBI trades survey indicated that the retail sales rebounded in May from April. The GBP hit a high of 1.4740 and a low of 1.4478 against the USD in the previous week. The pair is expected to find support at 1.4487, and a fall through could take it to the next support level of 1.4352. The pair is expected to find its first resistance at 1.4749, and a rise through could take it to the next resistance level of 1.4876. Looking ahead, investors will watch the Markit services and manufacturing PMIs for further cues. Additionally, investors’ will also watch the construction PMI and the consumer credit.
USDJPY
The USD advanced against the JPY last week, closing 0.15% higher at 110.31. On the data front, Japan’s Nikkei manufacturing PMI contracted in May, witnessing its sharpest fall in 41 months, as the nation recovered from the earthquakes, weighing heavily on the goods producers. Moreover, the national consumer prices dropped for a second straight month in April, stoking fears of deflation and putting pressure on the Bank of Japan to provide some monetary stimulus for achieving its 2.0% inflation target. Further, the coincident index tracking economy activity climbed in March while the leading index advanced during the same month. During the previous week, the pair traded at a high of 110.45 and a low of 109.17. The pair is expected to find support at 109.50, and a fall through could take it to the next support level of 108.70. The pair is expected to find its first resistance at 110.78, and a rise through could take it to the next resistance level of 111.26. In the week, market participants look forward to the Japan’s unemployment rate, industrial production along with the consumer confidence index for further cues. Moreover, traders will also keep a watch on the Nikkei manufacturing PMI, construction orders and housing starts for further direction.
USDCHF
The USD traded 0.44% higher against the CHF last week, with the pair closing at 0.9947. On the data front, Switzerland’s industrial production rose on a quarterly basis in the first three months of 2016, rising for the first time since the last quarter of 2014. Moreover, the trade surplus widened in April, as the exports increased, while the imports declined on a monthly basis in April. Further, the UBS consumption indicator nudged up in April, amid momentum in the tourism and automotive industry. Additionally, the ZEW survey on economic expectations indicated a rise to a seven month high in May. The USD hit a high of 0.9949 and a low of 0.9872 against the CHF in the previous week. The pair is expected to witness its first support at 0.9896 and second support at 0.9846, while the first resistance is expected at 0.9973 and second resistance at 1.0000. Going forward, investors this week would closely monitor Switzerland’s GDP, real retail sales and KOF leading indicator for further direction in the Swiss Franc.
USDCAD
Last week, the USD traded 0.70% lower against the CAD and closed at 1.3021. The Bank of Canada (BoC) kept the benchmark interest rate steady at 0.5% at its recent monetary policy meeting, and the central bank stated that first quarter growth appears to be in line with its April forecast. Moreover, the BoC mentioned that the nation’s second quarter growth will be much weaker than predicted as a result of the wildfires in Canada, although the economy is expected to rebound in the third quarter as oil production will resume. The pair traded at a high of 1.3188 and a low of 1.2911 during the previous week. The pair is expected to find its first support at 1.2892 and first resistance at 1.3169. The second support is expected at 1.2763 and second resistance at 1.3317. Moving ahead, market participants would concentrate on Canada’s GDP, RBC manufacturing PMI and international merchandise trade for further cues.
AUDUSD
Last week, the AUD traded 0.55% lower against the USD and closed at 0.7182. In economic news, Australia’s CB leading indicator advanced in March, putting an end to consecutive three months of decline. Meanwhile, the construction work done in the nation eased in the first three months of 2016. Moreover, the capital expenditure slipped during the same period. During the previous week, the pair traded at a high of 0.7244 and a low of 0.7145. The pair is expected to witness its first support at 0.7137 and second support at 0.7091, while the first resistance is expected at 0.7236 and second resistance at 0.7289. Moving ahead, market participants will keep a tab on Australia’s gross domestic product, retail sales, trade balance, building permits, current account balance and performance of manufacturing and services indices all scheduled for the week.
Gold
Gold traded 3.16% lower during the previous week, closing at USD1212.38 per ounce, following hawkish comments from the US Fed Chair, Janet Yellen which raised hopes for a rate hike in the June. Last week, the precious metal traded at a high of USD1256.00 per ounce and a low of USD1209.00 per ounce. The yellow metal is expected to witness its first support at USD1197.53 per ounce and second support at USD1179.77 per ounce, while the first resistance is expected at USD1244.53 per ounce and second resistance at USD1273.77 per ounce.
Crude Oil
Last week, crude oil strengthened 1.9% to close at USD49.33 per barrel, after a decline in the US crude stockpiles coupled with the supply outages from Canada and Nigeria, raised hopes for decline in the global crude glut. American Petroleum Institute (API) reported that crude oil inventories declined 5.1mn bls last week to 536.8mn last week, while the US Energy Department reported that crude oil inventories fell more than expected, by 4.2mn bls to 537.1mn bls last week. Last week, the commodity traded at a high of USD50.21 per barrel and a low of USD47.64 per barrel. Crude oil is expected to its find support at USD48.06 per barrel, and a fall through could take it to the next support level of USD46.57 per barrel. The commodity is expected to find its first resistance at USD50.63 per barrel, and a rise through could take it to the next resistance level of USD51.71 per barrel.
Good trades.
