Last week, the forex market was dictated by the British Prime Minister’s Brexit speech, along with comments from the US President, Federal Reserve (Fed) Chairwoman and the European Central Bank’s (ECB) Chief.
The Pound ended the week higher against the USD, after UK’s Prime Minister, Theresa May, in a widely-trailed speech, vowed that Britain would leave the European single market to regain control of immigration and laws, thus putting an end to speculation that UK might try to seek a "soft Brexit". Further, she stated that the final Brexit deal will be voted on by both the houses of Parliament. Meanwhile, the Bank of England (BoE) Governor, Mark Carney, stated that he expects growth in the British economy to slow this year as a surge in inflation will weigh on wages and consumer spending. Further, he stated that UK growth was relying more heavily on consumer spending, rather than investment or exports.
The greenback ended the week lower against a basket of major currencies, after the US President, Donald Trump showed concerns over the local currency's strength, stating that it was “too strong” and “killing” American companies. Meanwhile, the Fed Chair, Janet Yellen, dropped hints that interest rates in the US could rise quickly this year. However, she warned that the US risks a “nasty surprise” if it waits too long to continue raising interest rates. Separately, the Fed’s Beige Book report revealed that US economy continued to expand at a modest pace across most regions through the end of last year and firms expressed optimism about growth in 2017. Further, the report pointed to a jump in manufacturing sector and tighter labor market, with modest increase in wages and rising prices pressures.
On the data front, the US consumer price index accelerated at the fastest annual pace since June 2014 in December, thus backing hopes for aggressive rate hikes this year. Moreover, the nation’s industrial production rebounded to its strongest level in more than two years in December. Further initial jobless claims unexpectedly dipped to a 43-year low in the week ended 14 January 2017. Also, the nation’s housing starts showed a strong performance in December, while building permits surprisingly eased in the same month. Meanwhile, the International Monetary Fund (IMF) boosted its estimates for US growth to 2.3% in 2017 and to 2.5% in 2018, on expected stimulus spending by the incoming Trump administration.
The Euro ended the week on a stronger footing against the USD, after the ECB, in a widely expected move, maintained its ultra-loose monetary policy, keeping interest rates at 0.00%. However, the ECB President, Mario Draghi, commented that inflation in the common currency region is being primarily driven by higher energy costs and the recent pick-up in momentum is unlikely to sustain.
EURUSD
During the previous week, the EUR traded 0.55% higher against the USD and ended at 1.0699, after the ECB held the key interest rate steady at 0.00%, as widely expected. Gains in the Euro were boosted further, after the Eurozone’s final consumer price index (CPI) rose 1.1% on an annual basis in December, in line with preliminary estimates. Also, the region’s seasonally adjusted trade surplus widened more than expected in November, while the seasonally adjusted construction output advanced in the same month. Also, the region’s ZEW survey of economic sentiment index advanced less than expected in January. Meanwhile, the IMF revised up its growth forecast for the Eurozone by 0.1% to 1.6% for 2017 and 2018. Separately, Germany’s final inflation rose as initially expected on an annual basis in December. Further, the nation’s ZEW economic sentiment index came in weaker than expected in January, while the ZEW current situation index advanced more than anticipated in the same month. During the previous week, the pair traded at a high of 1.0719 and a low of 1.0580. The pair is expected to witness its first support at 1.0612 and second support at 1.0526, while the first resistance is expected at 1.0751 and second resistance at 1.0804. This week, investors would focus on the ECB President, Mario Draghi’s speech along with the flash Markit manufacturing and services PMI across the Eurozone and the region’s consumer confidence data. Additionally, Germany’s Ifo business climate and expectations indices, GfK consumer confidence survey and retail sales data, will also be on investors’ radar.
GBPUSD
The GBP traded 1.63% higher against the USD last week, with the pair closing at 1.2374, following Theresa May’s speech that outlined Britain’s plans for leaving the European Union (EU). On the data front, UK’s annual CPI climbed more than anticipated by 1.6% in December. Further, the nation’s ILO unemployment rate remained unchanged at 4.8% in the September-November 2016 period, meeting market expectations. However, the number of people in employment fell in the same period. On the contrary, the nation’s retail sales dropped in December, whereas the RICS house price balance surprisingly eased in the same month. Separately, the IMF upgraded its forecasts for the UK economy this year to 1.5%, up from 1.1%, amid fresh signs that businesses and consumers have shrugged off uncertainty created by the historic Brexit vote. However, growth forecast for 2018 was revised down from 1.7% to 1.4%. During the previous week, the pair traded at a high of 1.2416 and a low of 1.1988. The pair is expected to find its first support at 1.2093 and first resistance at 1.2521. The second support is expected at 1.1827 and second resistance at 1.2683. Looking ahead, investors anxiously await BoE Governor Mark Carney’s speech accompanied with UK’s flash 4Q GDP, BBA mortgage applications and public sector net borrowings data, all due to release this week.
USDJPY
The USD traded 0.08% higher against the JPY last week, with the pair closing at 114.60. Macroeconomic data showed that Japan’s final industrial production climbed in November, confirming the preliminary print. Also, the nation’s tertiary industry index rose in November, meeting market expectations. On the other hand, machinery orders slid more than estimated in the same month. Separately, the IMF predicted Japan’s economy to grow 0.8% this year, up 0.2% from its previous estimate in October. The USD hit a high of 115.62 and a low of 112.57 against the JPY in the previous week. Immediate downside, the first support level is seen at 112.83, followed by 111.18, while on the upside, the first resistance level situated in 115.88, followed by 117.28. This week, investors will concentrate on Japan’s national consumer price index, preliminary Nikkei manufacturing PMI, small business confidence index and adjusted merchandise trade balance data, to gauge strength in the nation’s economy.
USDCHF
The USD traded 0.7% lower against the CHF last week, with the pair closing at 1.0012. On the economic front, Switzerland’s producer and import price index rose in December, at par with market expectations. During the previous week, the pair traded at a high of 1.0137 and a low of 0.9996. The pair is expected to find support at 0.9967, and a fall through could take it to the next support level of 0.9911. The pair is expected to find its first resistance at 1.0108, and a rise through could take it to the next resistance level of 1.0193. Moving ahead, Switzerland’s trade balance, UBS consumption indicator and ZEW survey of expectations index, all scheduled to release this week, will keep investors’ on their toes.
USDCAD
During the previous week, the USD traded 1.6% higher against the CAD and ended at 1.3321, after the Bank of Canada (BoC) Governor, Stephen Poloz, warned that an interest rate cut remains in play, if downside risks from a much more protectionist United States under the President-elect Donald Trump materializes. The BoC, in its latest monetary policy meeting, opted to leave the benchmark interest rate unchanged at 0.5%, as widely expected. Additionally, the central bank, its Monetary Policy Report, predicted Canadian economy to grow by 2.1% in each of 2017 and 2018 and that it would return to full capacity around mid-2018. In other economic news, Canada’s annual inflation climbed less than forecasted by 1.5% in December. Additionally, the nation’s retail sales advanced less than expected in November, whereas existing home sales rebounded in December. The pair traded at a high of 1.3388 and a low of 1.3019 during the previous week. Immediate downside, the first support level is seen at 1.3101, followed by 1.2876, while on the upside, the first resistance level situated in 1.3470, followed by 1.3614. Going forward, Canada’s CFIB business barometer index and wholesale sales data, due to release this week, will pique market attention.
AUDUSD
The AUD strengthened against the USD last week, closing 0.72% higher at 0.7553. Data released over the last week indicated that Australia’s seasonally adjusted unemployment rate unexpectedly nudged higher to 5.8% in December. On the contrary, the nation’s consumer inflation expectations rose in January. Moreover, the nation’s Westpac consumer confidence index and HIA new home sales, both rebounded in January. The pair traded at a high of 0.7588 and a low of 0.7458 during the previous week. The pair is expected to find its first support at 0.7477 and first resistance at 0.7607. The second support is expected at 0.7403 and second resistance at 0.7663. Looking ahead, investors will concentrate on Australia’s consumer price index, the sole important release this week.
Gold
During the previous week, gold traded 1.08% higher and ended at USD1210.32 per ounce, following weakness in the greenback after the inauguration speech of the 45th President of the US highlighted uncertainty about the future-path of the US policies. Gold hit a high of USD1218.90 per ounce and a low of USD1195.40 per ounce during the previous week. The precious metal is expected to find its first support at USD1195.63 per ounce and first resistance at USD1219.13 per ounce. The second support is expected at USD1183.77 per ounce and second resistance at USD1230.77 per ounce.
Crude Oil
Last week, crude oil strengthened 1.62% to close at USD53.22 per barrel, on hopes that a weekend meeting of top oil producers would demonstrate compliance to a global output cut agreement. Gains in crude prices were boosted further, after the International Energy Agency (IEA) disclosed that global oil markets were tightening even before cuts promised by OPEC and non-OPEC countries, while OPEC’s monthly report signaled a drop in the global oil supply surplus this year as its December output fell from a record high. Meanwhile, Saudi Energy Minister, Khalid al-Falih, stated that the country will adhere strictly to its crude output reduction commitment. Separately, the Energy Information Administration (EIA) showed that US crude stockpiles unexpectedly rose by 2.3 million barrels to a total of 485.5 million barrels in the week to 13 January 2017, while the American Petroleum Institute (API) indicated that US crude oil inventories narrowed by 5.0 million barrels last week. Last week, the commodity traded at a high of USD54.32 per barrel and a low of USD51.72 per barrel. Immediate downside, the first support level is seen at USD51.81 per barrel, followed by USD50.46 per barrel, while on the upside, the first resistance level situated in USD54.41 per barrel, followed by USD55.66 per barrel.
Good trades Traders.
