The highlights of the week were minutes of the European Central Bank’s (ECB) September meeting, robust US wage growth data and rumbling political uncertainties in the UK.
The greenback gained ground against its major counterparts last week, after data indicated that average hourly earnings of all employees in the US grew above market expectations in September, hinting that a slack in the nation’s wage growth may be waning to allow the Federal Reserve to hike interest rate again before the year-end. Moreover, the nation’s unemployment rate unexpectedly declined to a 16-year low of 4.2% in September. However, the nation’s non-farm payrolls unexpectedly dipped for the first time in 7 years in the same month, as distortions caused by a pair of hurricanes weighed on the nation’s job growth. On the contrary, the nation’s ISM manufacturing index surprised to the upside in September, while the non-manufacturing activity surged to a 12 year high in the same month.
Another set of data revealed that construction spending in the US sharply rebounded in August, while trade deficit narrowed to an 11-month low in the same month, as exports of goods and services jumped to a nearly 3-year high.
The Euro ended the week lower against the USD, after the ECB’s latest meeting minutes showed that officials fretted over recent surge in the Euro and stressed the need for a substantial long-term stimulus. Further, minutes revealed that policymakers debated on how to pare back the central bank’s massive bond-buying program and broadly agreed that October’s meeting would be the right time for the bulk of the decisions.
The Pound ended the week on a weaker footing against the USD, as rumors that the British Prime Minister, Theresa May, could be ousted in the coming months, sparked a fresh wave of political uncertainty in the UK. Losses in the Pound were extended, after the Brexit Minister, David Davis, stated that Britain is ready to walk away without a deal if Brexit talks fail. Separately, the EU’s Chief Brexit negotiator, Michel Barnier again warned that Brexit negotiations are progressing too slowly and added that “serious divergences” persist.
On the data front, UK’s Markit manufacturing sector growth softened in September, while the construction sector suffered an unexpected contraction in the same month. However, some concerns over a Brexit-induced economic slowdown eased after data showed that activity in the nation’s services sector surprisingly advanced in September.
EURUSD
The EUR traded 0.71% lower against the USD last week, with the pair closing at 1.1730, after minutes of the ECB’s September meeting highlighted concerns over rapid appreciation of the Euro. In economic news, data indicated that the Eurozone’s unemployment rate unexpectedly remained steady at 9.1% in August. Moreover, the region’s final Markit services PMI was surprisingly revised up in September, while the final Markit manufacturing PMI was revised lower in the same month. On the contrary, the region’s seasonally adjusted retail sales recorded an unexpected drop on a monthly basis in August. Separately, Germany’s Markit manufacturing PMI as well as the services PMI, both advanced as initially estimated in September. On the other hand, the nation’s Markit construction PMI dropped in September, while the seasonally adjusted factory orders sharply rebounded on a monthly basis in August. The pair traded at a high of 1.1808 and a low of 1.1670 during the previous week. The pair is expected to find its first support at 1.1665 and first resistance at 1.1803. The second support is expected at 1.1598 and second resistance at 1.1874. This week, investors would focus on a speech by the ECB President, Mario Draghi along with the Eurozone’s Sentix investor confidence index and industrial production data. Additionally, Germany’s industrial production and trade balance data, would be keenly watched by market participants.
GBPUSD
The GBP declined against the USD last week, closing 2.48% lower at 1.3066, amid fresh political upheaval in the UK. Meanwhile, the Bank of England’s (BoE) Financial Policy Committee (FPC) warned that Brexit poses “substantial risk” to the ability of British companies to borrow from European banks and to some clearing activity which might have to relocate from London once Brexit takes place. Further, the committee judged that the risk of disruption to wholesale UK banking services could be larger than previously estimated. On the macro front, Britain’s Markit manufacturing PMI declined more-than-expected in September, while the Markit construction PMI unexpectedly eased in the same month. Nevertheless, the nation’s Markit services PMI surprisingly advanced in September. During the previous week, the pair traded at a high of 1.3396 and a low of 1.3027. The pair is expected to find its first support at 1.2932 and first resistance at 1.3301. The second support is expected at 1.2795 and second resistance at 1.3533. Looking ahead, traders anxiously await UK’s industrial and manufacturing production, NIESR GDP estimate, construction output and total trade balance data, all slated to release this week. Also, the BoE’s credit conditions survey report, due to release later in the week, will attract market attention.
USDJPY
The USD traded 0.12% higher against the JPY last week, with the pair closing at 112.65. On the data front, Japan’s final Nikkei manufacturing PMI rose more than initially estimated in September. Additionally, the nation’s Tankan large manufacturing index advanced above market expectations in 3Q 2017, while the Tankan non-manufacturing index remained unchanged in the same period. Other economic data showed that Japan’s Nikkei services PMI registered a drop in September. Further, the nation’s flash leading economic index climbed less-than-expected in August, whereas the preliminary coincident index rose more-than-anticipated in the same month. During the previous week, the pair traded at a high of 113.44 and a low of 112.32. The pair is expected to witness its first support at 112.17 and second support at 111.68, while the first resistance is expected at 113.29 and second resistance at 113.92. Moving ahead, market participants will look forward to Japan’s trade balance (BOP basis), Eco-Watchers survey, machine orders, machine tool orders and tertiary industry index, all due to release this week.
USDCHF
During the previous week, the USD traded 1.18% higher against the CHF and ended at 0.9797. Macroeconomic data indicated that Switzerland’s consumer price index rose on a monthly basis in September, at par with market expectations. Further, the nation’s SVME manufacturing PMI unexpectedly climbed in September, while the nation’s real retail sales slid on an annual basis in August. During the previous week, the pair traded at a high of 0.9836 and a low of 0.9683. The pair is expected to witness its first support at 0.9699 and second support at 0.9615, while the first resistance is expected at 0.9852 and second resistance at 0.9921. Going forward, traders will keep a close watch on Switzerland’s unemployment rate data, the sole important release this week.
USDCAD
Last week, the USD traded 0.46% higher against the CAD and closed at 1.2529. On the macro front, Canada’s unemployment rate remained steady at 6.2% in September, meeting market expectations, while the nation’s seasonally adjusted Ivey PMI surprisingly climbed in the same month. Additionally, the nation’s Markit manufacturing PMI climbed in September, whereas the international merchandise trade deficit surprisingly widened in August. During the previous week, the pair traded at a high of 1.2598 and a low of 1.2449. Immediate downside, the first support level is seen at 1.2455, followed by 1.2377, while on the upside, the first resistance level situated in 1.2604, followed by 1.2675. Going forward, Canada’s housing starts, building permits and new house price index, all slated to release this week, would be on investors’ radar.
AUDUSD
The AUD weakened against the USD last week, closing 0.86% lower at 0.7767, following downbeat economic data released in Australia. Data indicated that Australia’s AiG performance of manufacturing, services as well as construction indices, all declined in September. Further, the nation’s seasonally adjusted monthly retail sales unexpectedly fell in August. In contrast, the nation’s seasonally adjusted building approvals rebounded less-than-expected on a monthly basis in August, while new home sales rebounded on a monthly basis in the same month. Also, the nation’s trade surplus widened more-than-anticipated in August. Separately, the Reserve Bank of Australia (RBA), at its latest monetary policy meeting, left the key interest rate unchanged at a record low 1.5%, as widely expected. In a post-meeting statement, Governor Philip Lowe highlighted that unemployment rate in Australia was unlikely to fall quickly while adding sluggish wages was going to be a problem for some time. He also stated that the impact of a stronger Australian Dollar is expected to contribute to continued subdued price pressures in the economy. During the previous week, the pair traded at a high of 0.7875 and a low of 0.7733. The pair is expected to witness its first support at 0.7710 and second support at 0.7650, while the first resistance is expected at 0.7852 and second resistance at 0.7934. Ahead in the week, investors will eye the release of Australia’s NAB business confidence index, consumer inflation expectations and the Westpac consumer confidence index.
Gold
Gold fell last week, closing 0.24% lower at USD1276.68 per ounce, amid a broad strength in the greenback. However, losses in gold prices were limited, after news that North Korea may be preparing for a long-range missile test increased the safe-haven appeal of the precious yellow metal. The precious metal traded at a high of USD1285.00 per ounce and a low of USD1262.80 per ounce in the previous week. Immediate downside, the first support level is seen at USD1266.13 per ounce, followed by USD1253.37 per ounce, while on the upside, the first resistance level situated in USD1288.33 per ounce, followed by USD1297.77 per ounce.
Crude Oil
Last week, crude oil weakened 4.61% to close at USD49.29 per barrel, on concerns that Tropical Storm Nate would cause refiners on the US Gulf Coast to slow down. Losses in crude prices deepened after the Energy Information Administration (EIA) reported that US crude exports surged to a record 2.0 million barrels per day in the week ended 29 September. Meanwhile, the OPEC Secretary-General, Mohammad Barkindo, stated that adherence to the crude production deal between OPEC and non-OPEC members is extremely high. However, losses in crude prices were limited, after the EIA indicated that US crude oil stockpiles fell by 6.0 million barrels to 465.0 million barrels during the week ended 29 September, while the American Petroleum Institute (API) reported that US crude oil inventories fell by 4.1 million barrels to 465.4 million barrels in the same week. The commodity traded at a high of USD51.68 per barrel and a low of USD49.10 per barrel in the previous week. Crude oil is expected to witness its first support at USD48.34 per barrel and second support at USD47.43 per barrel, while the first resistance is expected at USD50.92 per barrel and second resistance at USD52.59 per barrel.
Good trades, Traders. 𝆊☼𝆋
