Last week, the forex market was dictated by monetary policy meetings of the European Central Bank (ECB) and the Bank of Canada (BoC) and robust US GDP data.
The greenback gained ground against a basket of major currencies last week, after data revealed that the US economy grew at an annualized rate of 3% in the third quarter above market expectations, raising prospects for an interest rate hike in December. Gains in the US Dollar were extended further amid speculations that John Taylor would be elected as the next Federal Reserve Chair, who is a more hawkish candidate than Janet Yellen, which could fasten the pace of interest rate hikes in the future.
Macroeconomic data released in the US indicated that the nation’s manufacturing sector advanced beyond expectations, notching a 9-months high in October, boosted by a rise in manufacturing production and new orders growth. Further, the nation’s new home sales surged to a record high in 10 years in September, hinting that the nation’s property market may have regained some momentum. On the other hand, the nation’s goods trade balance deficit widened in September, led by rise in oil imports.
The Euro ended the week on a weaker footing after the Catalan parliament declared independence from Spain, with a view to breaking off as a sovereign republic. Losses in the euro were extended further after the ECB deployed a dovish tone and delayed the tapering to its bond purchases programme. The ECB maintained the key interest rate unchanged at 0.00% as expected. Additionally, the central bank stated that it will reduce its monthly purchase of bonds from January 2018 and will extend those purchases till the end of September 2018, or beyond, if necessary. On the data front, the Eurozone’s manufacturing sector surprisingly advanced to a record high in October, boosted by improvement in new orders, while the services sector expanded at a slower-than-expected pace in the same month. Separately, Germany’s manufacturing sector growth declined less than expected in October, while the services sector plunged below expectations in the same month.
The CAD ended the weak lower against the USD, after BoC left its interest rate unchanged at 1.0%, amid uncertainty over renegotiation of the North American Free Trade Agreement. However, it also signaled that future rate hikes are likely on the horizon. Further, BoC raised its forecast for growth to 3.1% this year, 2.1% in 2018 and 1.5% in 2019.
EURUSD
Last week, the EUR traded 1.49% lower against the USD and ended at 1.1608, after the ECB, at its latest monetary policy meeting, announced plans to scale down but extend its quantitative easing programme. Moreover, the losses were extended further after Catalonia's parliament declared independence from Spain in a disputed vote.
On the macro front, the Eurozone’s preliminary Markit manufacturing PMI unexpectedly climbed in October, whereas the flash services PMI declined more-than-anticipated in the same month. Moreover, the region’s flash consumer confidence index improved in October.
Separately, Germany’s flash Markit manufacturing PMI slightly eased in October, while the services PMI fell more-than-anticipated in the same month. Additionally, the nation’s GfK consumer confidence index unexpectedly dropped in November. On the contrary, the nation’s Ifo business climate and business expectations indices, both unexpectedly advanced in October. Meanwhile, the Bundesbank’s monthly report indicated that German economic growth will maintain its strong momentum in the third quarter of 2017, driven by robust industrial orders.
The pair traded at a high of 1.1837 and a low of 1.1575 during the previous week. The pair is expected to find its first support at 1.1510 and first resistance at 1.1772. The second support is expected at 1.1412 and second resistance at 1.1936.
This week, investors would focus on the consumer price inflation and unemployment rate data across the Eurozone. Additionally, the Eurozone’s GDP numbers and Germany’s retail sales data would also be keenly watched by traders.
GBPUSD
Last week, the GBP traded 0.47% lower against the USD and closed at 1.3128, after the Bank of England’s (BoE) Deputy Governor, Jon Cunliffe raised uncertainty over a potential November interest rate hike.On the macro front, Britain’s preliminary gross domestic product (GDP) climbed more-than-expected by 0.4% on a quarterly basis in 3Q 2017. Separately, the British Prime Minister, Theresa May, stated that she remains “ambitious and positive” about UK’s future and added that constructive progress had been made in Brexit negotiations. Other data revealed that the nation’s CBI industrial trends total orders surprisingly fell in October.
The GBP hit a high of 1.3279 and a low of 1.3070 against the USD in the previous week. The pair is expected to witness its first support at 1.3040 and second support at 1.2951, while the first resistance is expected at 1.3249 and second resistance at 1.3369. Looking ahead, market participants anxiously await the BoE’s interest rate decision, scheduled later this week. Meanwhile, Britain’s Markit manufacturing, services and construction PMIs along with the nation’s net consumer credit and GfK consumer confidence data would also generate a lot of market attention.
USDJPY
During the previous week, the USD traded 0.13% higher against the JPY and ended at 113.67 after data indicated that Japan’s national consumer price index (CPI) rose 0.7% on an annual basis in September, meeting market expectations.
In economic news, the nation’s final leading economic index and the coincident index, both climbed more than initially estimated in August. On the other hand, the nation’s flash Nikkei manufacturing PMI eased in October.
The pair traded at a high of 114.45 and a low of 113.25 during the previous week. The pair is expected to witness its first support at 113.14 and second support at 112.59, while the first resistance is expected at 114.34 and second resistance at 114.99.
Going ahead, investors would focus on the Bank of Japan’s (BoJ) monetary policy decision, scheduled this week. Moreover, Japan’s unemployment rate, industrial production, retail trade and small business confidence index, all will be on investors’ radar.
USDCHF
During the previous week, the USD traded 1.41% higher against the CHF and ended at 0.9981.
On the macro front, Switzerland’s ZEW economic expectations index rose in October, while the nation’s UBS consumption indicator registered a rise in September.
The USD hit a high of 1.0038 and a low of 0.9831 against the CHF in the previous week. The pair is expected to witness its first support at 0.9862 and second support at 0.9743, while the first resistance is expected at 1.0069 and second resistance at 1.0157.
Going forward, traders would eye Switzerland’s KOF leading indicator, SVME-PMI, retail sales and SECO consumer confidence index, all set to be released this week.
USDCAD
The USD rose against the CAD last week, closing 1.43% higher at 1.2808, after the Bank of Canada (BoC), at its latest monetary policy meeting, expressed caution on the prospects of future rate increases. The BoC, as widely expected, opted to leave the benchmark interest rate unchanged at 1.00%.
Losses in the Canadian Dollar were extended, after data showed that Canada’s retail sales unexpectedly eased on a monthly basis in August. Meanwhile, the nation’s consumer price inflation rose less-than-anticipated by 1.6% on an annual basis in September.
During the previous week, the pair traded at a high of 1.2917 and a low of 1.2614. The pair is expected to find support at 1.2642, and a fall through could take it to the next support level of 1.2477. The pair is expected to find its first resistance at 1.2945, and a rise through could take it to the next resistance level of 1.3083.
AUDUSD
The AUD weakened against the USD last week, closing 1.79% lower at 0.7677, following weaker-than-expected inflation data that damped the possibility for a near-term interest rate hike.
Data revealed that Australia’s CPI advanced less-than-expected by 0.6% on a quarterly basis in 3Q 2017. Moreover, the nation’s producer price index advanced on a quarterly basis in the third quarter of 2017.
During the previous week, the pair traded at a high of 0.7835 and a low of 0.7625. The pair is expected to find its first support at 0.7590 and first resistance at 0.7800. The second support is expected at 0.7503 and second resistance at 0.7923.
This week, market participants would look forward to Australia’s AiG performance of manufacturing and services indices, retail sales, HIA new home sales and trade balance data.
Gold
During the previous week, gold traded 0.56% lower and ended at USD1273.35 per ounce, amid gains in the US dollar boosted by upbeat US GDP data. Separately, gold holdings in the SPDR Gold Trust ended the week at 684.63 tons.
Last week, the precious metal traded at a high of USD1285.30 per ounce and a low of USD1263.80 per ounce. Gold is expected to its find support at USD1263.83 per ounce, and a fall through could take it to the next support level of USD1253.07 per ounce. The yellow metal is expected to find its first resistance at USD1285.33 per ounce, and a rise through could take it to the next resistance level of USD1296.0perounce
Crude oil traded 3.97% higher in the previous week, closing at USD53.90 per barrel.
Saudi Arabia's Crown Prince Mohammad bin Salman stated that the kingdom would support extending the output cut deal in a bid to stabilize oil demand and supply.
Meanwhile, the US Energy Department reported that crude oil inventories increased by 900,000 barrels for the week ended October 20, 2017. Also, the American Petroleum Institute reported a 519,000-barrel climb in the week ended October 20, 2017.
The commodity traded at a high of USD54.20 per barrel and a low of USD51.55 per barrel in the previous week. Immediate downside, the first support level is seen at USD52.43 per barrel, followed by USD50.66 per barrel, while on the upside, the first resistance level situated in USD55.08 per barrel, followed by USD55.96 per barrel.
Traders never confuse sufficiency with mediocrity, maintain our natural stupidity, breathe deeply and look forward always, is one of the fundamental elements of continuity. Happy trading. ↟
