Weekly Forex Update
The release of a worse than expected US nonfarm payrolls report on Friday reversed the direction of the greenback and finally pushed it lower against its peers, as investors speculated how the US Federal Reserve (Fed) would react to a strong decline in the nation’s hiring, after the central bank took the bold step to scale back the size of its monthly asset purchases in the past month by $10 billion from January.
Meanwhile, the release of the Fed’s December policy meeting minutes conveyed the diminishing benefits of the monthly bond purchases to the US economy and also revealed that the policymakers were concerned about the creditworthiness of the central bank. However, it also threw light upon the worries of the policymakers about the inflation in the nation which continues to remain comfortably below the nation’s benchmark level.
Meanwhile, Fed’s regional President from St.Louis opined that the consumer prices in the US are expected to pick up in the current year. He also predicted that the US economy is expected to grow by more than 3% in 2014. Separately, Fed’s Richmond President, voiced to expect a policy rollback at the central bank’s January policy meeting similar to that of the past month.
In other economic news, ADP jobs data reported a contradictory view, indicating that the US economy added larger than expected jobs in December. Meanwhile, initial jobless claims experienced a drop for the week ended January 4, while the factory orders rebounded in November.
On the other side of Atlantic, the European Central Bank (ECB) left its interest rates unchanged and indicated to use all possible tools to foster the economic activities in the bloc should the circumstances worsen in the future. Meanwhile, Euro-zone’s economy grew at a slower pace in the third quarter, signaling the headwinds in Euro region’s economy. In a noteworthy development, the Standard & Poor's rating agency, maintained its ‘AAA’ rating for Germany.
The Sterling continued to trade in green, after the British Chamber of Commerce (BCC) in its quarterly bulletin noted the nation’s iconic recovery is expected to continue in a foreseeable future. However, a slower growth forecast report from the National Institute of Economic & Social Research (NIESR) pared the gains of the Sterling. The Bank of England (BoE), meanwhile, kept its monetary tools on hold at its policy meeting held last week.
The JPY and the Swissy traded higher against the USD. Consumer prices and jobless rate in the Switzerland remained unchanged in December. The Aussie pared its gains after the Chinese inflation and trade data weighed upon the trading prospects between the two nations.
The Loonie bucked the overall trend and dropped against the greenback, as recent batch of disappointing local macroeconomic data spurred speculation that Bank of Canada’s Governor, Stephen Poloz, might announce some easing measures to restore the economic status of the nation.
EUR USD
Last week, the EUR traded 0.51% higher against the USD and closed at 1.3672. The greenback fell after the latest nonfarm payrolls report triggered uncertainty about the health of the US labor market. However, the remarks from the ECB Chief at the central bank’s policy meeting that low inflation concerns are expected to persist in the Euro-area for a foreseeable future capped the gains in the common currency. Furthermore, a slower growth in the bloc’s gross domestic product also highlighted the lingering concerns in the Euro-zone’s economy. In economic news, services activities in most of the members of the bloc improved in December. Meanwhile, the German inflation picked up in December. However, inflation remained muted in the Euro-zone. The German industrial production and factory orders improved in November. During the week, the pair traded at a high of 1.3688 and a low of 1.3548. The pair is expected to find its first support at 1.3584, with the next support expected at 1.3496. The first resistance is at 1.3724, and the next at 1.3776.
The pair would take inspiration from the ECB’s monthly report during this week’s trading activity. Also, the final readings in the Euro-zone’s and German inflation report are expected to garner much of the market’s attention, accompanied by the bloc’s industrial production and trade balance data that would bring in many fluctuation in the pair.
GBP USD
In the last week, GBP traded 0.29% higher against the USD and closed at 1.6474, after the BCC in its quarterly survey noted that the British economy would continue to advance at a faster pace in 2014. Also, disappointing US jobs data released on Friday weighed on the greenback. However, the gains in local currency were capped, after the NIESR estimated that the UK’s economy rose at a slower pace during the three months ending December. On the data front, services activity in the UK deteriorated in December, while Halifax house prices dropped in the similar period. Meanwhile, trade deficit in the nation shrank at a slower pace in November and the industrial and manufacturing production also declined in November. The BoE, meanwhile, kept its monetary tools unchanged in its first meeting for this year. The pair traded at a high of 1.6519 and a low of 1.6337 in the previous week. GBPUSD is expected to find its first support at 1.6368, with the next at 1.6261. Resistance exists first at 1.6550, and then at 1.6625.
The British consumer prices and retail sales are the major economic fodder from the UK that would assist traders to place their bets in the pair.
USD JPY
The USD traded 0.44% lower against the JPY over the past week, closing at 104.01, as an unexpected decline in the US jobs data dragged the greenback southwards. In economic news, coincident index in Japan rose at a slower pace in November. Meanwhile, the leading index improved in the similar period. The pair traded at a high of 105.36 and a low of 103.83. The pair is expected to find its first support at 103.44, with the next support expected at 102.87. The first resistance is at 104.97 and the next at 105.93.
Moving forward, the Japanese industrial production, consumer confidence, machinery orders and trade balance data are the main macroeconomic triggers in Japan during the week.
USD CHF
USD traded 0.24% lower against the CHF and closed at 0.9021 in the last week. On the data front, jobless rate and consumer price inflation in Switzerland remained unchanged in December. During the period, the pair traded at a high of 0.9128 and a low of 0.9020. The first support is at 0.9033, and the next at 0.8972. Resistance exists first at 0.9141, and then at 0.9188.
The Swiss retail sales data would remain on the radar of market participants during the week. Also the traders in the Swiss Franc would track the global data points for placing their bets in the pair.
USD CAD
Last week, the USD traded 2.57% higher against the CAD and closed at 1.0891. The Loonie lost ground as a series of disappointing macroeconomic data spurred speculations that the central bank might introduce a rate cut to foster the economic activities in the nation. The jobs report noted that employment change in Canada dropped significantly in December and the jobless rate also increased in the similar period. The trade deficit widened unexpectedly in November and the nation’s manufacturing activity went into the contraction territory in the past month. Also, the Canadian housing market data suggested that a momentum is gradually slowing for home prices and construction. USDCAD traded at a high of 1.0947 and a low of 1.0608 in the previous week. The first support is at 1.0684, with the next at 1.0476. The first resistance is at 1.1023, while the next is at 1.1154.
The Canadian economic calendar is pretty light during the week, with the nation’s housing market data being the only key update, which would leave investors to rely upon the news flowing from its Southern neighbors.
AUD USD
AUD traded 0.14% higher against the USD last week, and closed at 0.8989, following the release of mixed economic data from Australia. Investors cheered a better than expected retail sales, trade balance and new home sales data, while dismal November building permits and AIG performance of service data for December disappointed. Moreover, a decline in the inflation and trade balance data in the nation’s prime trading partner, China, also dampened the trading activity between the two nations. During the week, the pair traded at a high of 0.9001 and a low of 0.8864. The first support is at 0.8902, and the next at 0.8814. The first resistance is at 0.9039, and the next at 0.9088.
The release Australian jobs data would act as a catalyst in determining the trend of the Aussie during the week. Traders would also track a string of economic data from China, Europe and the US ahead in the week.
Gold
In the prior week, Gold traded 0.72% higher against the USD and closed at USD1246.28, as a sudden drop in the US hiring data increased the demand for the gold’s safe haven appeal. The gold price also found support after the minutes of the Fed’s December policy meeting expressed concerns about the downside risks to bring in further reductions in the bond purchases, as the nation’s inflation still remained at relatively low levels in the recent past. However, a series of positive macroeconomic data from the US arrested precious metal’s rally in the past week. The ADP jobs data pointed out that US employers hired more individuals during December. Meanwhile, initial jobless benefits dropped at a quicker pace. The yellow metal traded at a high of 1248.92 and a low of 1213.03 in the previous week. Gold is expected to find support at 1223.23 and the next at 1200.19. The first resistance is at 1259.12, while the next is at 1271.97.
During the week, traders in the yellow have their plates full with various macroeconomic updates from the US, mainly the Fed’s Beige Book and inflation data.
Crude Oil
Oil prices traded 1.51% lower against the USD in the last week and closed at USD92.79, as reports that Iran would curb its nuclear activities from the end of this week calmed expectations of the continuation of the International sanction on the oil rich nation. Also, reports that the crude oil inventories in the US hit the life time high level during the past year weighed upon the commodity’s prices. The American Petroleum Institute reported a drop of 7.3 million barrels for the week ended January 3. Meanwhile, the Energy Information Administration reported a 2.7 million drop in the US crude oil inventories in the similar period. Oil traded at a high of 94.59 and a low of 91.24 in the previous week. Oil has its first major support at 91.16, while the next support exists at 89.52. The first resistance is at 94.51, and the next at 96.22.
Oil traders would rely on the developments in the Middle East for tracking the trend in the crude oil during the week. Also, the release of the macroeconomic data from the US would also influence the direction of the commodity.
Happy pips.
