Last week, the forex market was dictated by minutes of the Federal Reserve’s (Fed) latest meeting and downbeat US inflation numbers.
The greenback fell against its major currencies last week, after minutes of the FOMC’s September meeting revealed lingering concerns about persistently low inflation. According to minutes, policymakers believed that the US economy is strong enough to withstand another rate hike in December. However, many officials issued concerns that low inflation readings this year could prove more persistent and as such believed that “some patience” was warranted in hiking interest rates. Separately, the International Monetary Fund (IMF) revised up the US growth forecast to 2.2% in 2017 and 2.3% next year, both up from 2.1% estimated earlier. Also, global growth forecast was slightly raised for 2017 and 2018, citing brightening prospects in major economies.
Losses in the US Dollar were extended, after data showed that consumer prices in the US grew at a softer-than-expected pace on a monthly basis in September. However, it was the biggest increase in 8 months, amid a rise in gasoline prices following a pair of hurricanes. Moreover, the nation’s advance retail sales rebounded by the most in nearly 3 years in September, driven by strong auto sales, while the flash Michigan consumer sentiment index unexpectedly climbed to a 13-year high in October. Other data showed that first time claims for the US unemployment benefits dropped to its lowest in more than a month in the week ended 07 October.
The Pound ended the week higher against the USD, after reports that the European Union (EU) could offer Britain a 2-year transitional Brexit deal. However, gains in the Pound were limited, after the UK Prime Minister, Theresa May, warned the British public to prepare for crashing out of the European Union (EU) with no deal, outlining contingency plans to avoid border meltdown for businesses and travelers. Meanwhile, the EU chief negotiator, Michel Barnier, warned that Brexit talks were at an impasse.
The Euro ended the week on a stronger footing against the USD. Last week, the European Central Bank (ECB) President, Mario Draghi, stated that asset purchases would continue well past the end of its bond-buying programme and until officials see a sustained improvement in inflation. On the data front, the Eurozone’s seasonally adjusted industrial production notched a 9-month high in August, while the Sentix investor confidence jumped to a 10-year high in October. Separately, the IMF lifted the Eurozone’s growth forecast by 0.2% for both 2017 and 2018, citing a strong economic recovery.
EURUSD
Last week, the EUR traded 0.77% higher against the USD and closed at 1.1820, after the Eurozone’s Sentix investor confidence index advanced more-than-expected in October, while the seasonally adjusted industrial production rose above market expectations on a monthly basis in August. Separately, Germany’s final consumer price index (CPI) rose 1.8% on an annual basis in September, confirming the preliminary print. Also, the nation’s seasonally adjusted industrial production rebounded on a monthly basis in August and the seasonally adjusted trade surplus climbed more-than-anticipated in the same month. The EUR hit a high of 1.1880 and a low of 1.1720 against the USD in the previous week. The pair is expected to find its first support at 1.1734 and first resistance at 1.1894. The second support is expected at 1.1647 and second resistance at 1.1967. This week, investors would focus on a speech by the ECB President, Mario Draghi along with the release of ZEW economic sentiment index across the Eurozone. Additionally, the Eurozone’s final CPI and trade balance data would be keenly watched by traders.
GBPUSD
Last week, the GBP traded 1.68% higher against the USD and closed at 1.3285, after news that the British Prime Minister, Theresa May, could reshuffle her cabinet and leave out Foreign Secretary, Boris Johnson. Gains in the Pound were extended, after data showed that Britain’s manufacturing production rose more-than-expected on a monthly basis in August, while monthly industrial production grew as anticipated in the same month. Further, the nation’s construction output unexpectedly rebounded on a monthly basis in August, while the NIESR estimated UK’s gross domestic product (GDP) climbed 0.4% in the three months to September. However, the nation’s total trade deficit surprisingly widened in August. Separately, the Bank of England’s (BoE) credit conditions survey showed that British banks are planning the biggest cutback in unsecured credit in nearly 10 years over the next three months, following warnings that UK’s debt mountain has risen to dangerous levels. Meanwhile, UK’s Chancellor, Philip Hammond, stated that Brexit has clouded the nation’s economic outlook and added that the Government is preparing for the potential of a “hard Brexit” in 2019. The GBP hit a high of 1.3338 and a low of 1.3075 against the USD in the previous week. Immediate downside, the first support level is seen at 1.3128, followed by 1.2970, while on the upside, the first resistance level situated in 1.3391, followed by 1.3496. Looking ahead, a speech by the BoE Governor, Mark Carney along with Britain’s inflation, ILO unemployment rate and retail sales data, all due to release this week, will attract significant amount of investor attention.
USDJPY
The USD declined against the JPY last week, closing 0.74% lower at 111.82. Macroeconomic data indicated that Japan’s tertiary industry index unexpectedly fell in August. Further, the nation’s Eco-Watchers Survey for the future outlook dropped less-than-expected in September, whereas the Survey for the current situation advanced above market consensus in the same month. Also, the nation’s machinery orders sharply rebounded on an annual basis in August, while preliminary machine tool orders recorded a rise on an annual basis in September. Other economic data showed that Japan’s trade surplus (BOP basis) narrowed less-than-expected in August. During the previous week, the pair traded at a high of 112.83 and a low of 111.69. The pair is expected to witness its first support at 111.40 and second support at 110.97, while the first resistance is expected at 112.54 and second resistance at 113.25. Moving ahead, market participants will look forward to a speech by the BoJ Governor, Haruhiko Kuroda as well as Japan’s final industrial production, all industry activity index, all due this week.
USDCHF
The USD fell against the CHF last week, closing 0.53% lower at 0.9745. In economic news, Switzerland’s seasonally adjusted unemployment rate unexpectedly dropped to 3.1% in September. Further, the nation’s producer and import price index recorded a more-than-expected rise on a monthly basis in September. The USD hit a high of 0.9808 and a low of 0.9705 against the CHF in the previous week. The pair is expected to find its first support at 0.9697 and first resistance at 0.9800. The second support is expected at 0.9649 and second resistance at 0.9855. Going forward, investors will closely monitor Switzerland’s trade balance data, the sole important release this week.
USDCAD
The USD fell against the CAD last week, closing 0.49% lower at 1.2468. On the macro front, Canada’s unemployment rate remained steady at 6.2% in September, meeting market expectations, while the seasonally adjusted Ivey PMI surprisingly climbed in September. Also, the nation’s new house price index climbed less-than-expected on a monthly basis in August. On the other hand, the nation’s building permits declined more-than-anticipated on a monthly basis in August, while the seasonally adjusted housing starts dropped in September. The pair traded at a high of 1.2559 and a low of 1.2433 during the previous week. The pair is expected to find its first support at 1.2414 and first resistance at 1.2540. The second support is expected at 1.2360 and second resistance at 1.2612. Ahead in the week, the Bank of Canada’s (BoC) business outlook survey report and Canada’s consumer price inflation data, will keep investors on their toes.
AUDUSD
During the previous week, the AUD traded 1.54% higher against the USD and ended at 0.7887. Data indicated that Australia’s NAB business confidence index advanced in September, while the NAB business conditions index remained unchanged in the same month. Further, the nation’s Westpac consumer confidence index advanced in October and the consumer inflation expectation rose in the same month. Moreover, the nation’s seasonally adjusted home loan approvals climbed higher-than-anticipated on a monthly basis in August. Meanwhile, the Reserve Bank of Australia (RBA), in its twice-yearly Financial Stability Review, expressed deep concerns about the property market and warned that household borrowing is a key risk to the nation’s financial system as it could see households struggle to repay their debt. The pair traded at a high of 0.7897 and a low of 0.7748 during the previous week. The pair is expected to witness its first support at 0.7792 and second support at 0.7696, while the first resistance is expected at 0.7941 and second resistance at 0.7994. This week, market participants would await the release of the RBA’s October meeting minutes along with Australia’s unemployment rate data.
Gold
Last week, gold rose 2.13% to close at USD1303.82 per ounce, amid a broad weakness in the greenback after the latest Fed meeting minutes showed uncertainty on the US inflation outlook. Gold hit a high of USD1306.40 per ounce and a low of USD1277.70 per ounce during the previous week. The yellow metal is expected to witness its first support at USD1287.07 per ounce and second support at USD1268.03 per ounce, while the first resistance is expected at USD1315.77 per ounce and second resistance at USD1325.43 per ounce.
Crude Oil
Last week, crude oil strengthened 4.38% to close at USD51.45 per barrel, after the OPEC, in its monthly report, raised its global crude oil demand to 33.06 million barrels per day (bpd) in 2018. Gains in crude prices were boosted after the OPEC’s Secretary-General stated that talks were underway to extend a deal to freeze production beyond March 2018 and that more oil-producing countries may join the agreement. Oil prices gained further, after the Energy Information Administration (EIA) showed that US crude stockpiles dropped 2.8 million barrels to 462.2 million barrels in the week ended 06 October. However, the American Petroleum Institute (API) indicated that US crude oil inventories surprisingly rose by 3.1 million barrels to 468.5 million barrels in the same week. The commodity traded at a high of USD51.72 per barrel and a low of USD49.13 per barrel in the previous week. The commodity is expected to find its first support at USD49.79 per barrel and first resistance at USD52.38 per barrel. The second support is expected at USD48.17 per barrel and second resistance at USD53.35 per barrel.
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