Weekly Forex Update
During the past week, the greenback traded mostly lower against its key peers, as investors shunned the USD, following the release of disappointing US gross domestic product data and after the US Federal Reserve indicated that benchmark rates in the nation are expected to remain at current levels even after its bond buying programme comes to an end.
The decision of a fourth straight reduction in the size of the monthly asset purchases by the US Fed at its recently concluded policy meeting and encouraging US nonfarm payrolls report, ADP jobs and jobless rate data failed to provide support to the greenback.
Other key data released in the past week revealed that weekly initial jobless claims rose unexpectedly in the US while consumer confidence among the Americans fell at a quicker pace in April. Markit manufacturing PMI eased unexpectedly in April, while the Institute of Supply Management reported that the manufacturing PMI in the US improved at a faster pace in the similar period. Separately, personal spending inched higher in March.
The Euro edged higher against the USD, after the European Central Bank (ECB) President, Mario Draghi, indicated that the central bank is still a long way off from unveiling its bond buying measures in the Euro-zone. Over the weekend, news emerged that Portugal might exit its bailout programme by this month.
The GBP found support against the USD, as the Bank of England (BoE) Governor, Mark Carney, opined that the British economy is now showing sustainable evidence of recovery, triggering speculations of a rate hike on the horizon. Moreover, data indicated that the UK economy grew 0.8% during the first quarter of 2014.
The Bank of Japan (BoJ) lowered its growth outlook for Japan for 2015 at its policy meeting, after leaving its monetary tools unaltered and reiterating that the nation would hit its inflation target in the middle of the next year. Separately, the Japanese Prime Minister, Shinzo Abe, opined that the impact of the sales tax hike in the past month was lower than expectations.
The Loonie found support after data showed that the Canadian economy expanded by 0.2% in February, translating to an annual expansion of 2.5%. However, the comments from the Bank of Canada’s (BoC), Stephen Poloz, that door for a rate cut are still open capped the gains in the CAD. The Aussie lost ground, after a report revealed that manufacturing activity in its largest trading partner, China, rose at a slower pace in the past month.
Ahead this week, central banks from the UK, Euro-zone and Australia would announce their policy decisions.
EUR USD
Last week, the EUR traded 0.25% higher against the USD and closed at 1.3869, as the ECB Chief, Mario Draghi, stated that the central bank might not introduce its bond buying programme in the foreseeable future, as he does not expect any harm to the Euro region’s economy due to falling prices. He further echoed that low inflationary pressures are expected to persist in the Euro region for quite some time. Domestic macroeconomic data released during the week also supported the Euro. The German unemployment change dropped at a quicker pace in April. Meanwhile, consumer confidence in the Euro-zone rose more than the preliminary estimate in April, while manufacturing PMI and jobless rate in the bloc also came in better-than-expected. Sentiments were also boosted as data indicated that inflation in the Euro-zone accelerated in April. In a noteworthy development, the IMF and European Commission approved Portugal’s seeking total exit from its three year bailout programme later this month. During the week, the pair traded at a high of 1.3890 and a low of 1.3772. The pair is expected to find its first support at 1.3797, with the next support expected at 1.3726. The first resistance is at 1.3915, and the next at 1.3962.
The outcome of the ECB’s policy meeting would be the most crucial event this week. Also, the release of economic growth forecast for the region by the European Commission would influence the trend in the Euro during the week.
GBP USD
In the last week, GBP traded 0.40% higher against the USD and closed at 1.6870, as comments from the BoE Governor, Mark Carney, that the UK’s economic recovery is showing some concrete signs of sustainability stoked speculations that the central bank might hike its interest rates in the near future. Macroeconomic data also provided support to the Sterling. Manufacturing activity and consumer confidence in the UK improved more than analysts’ expectations. The Nationwide house prices rose in March, while the UK economy grew at a faster pace in the first quarter of 2014. The pair traded at a high of 1.6923 and a low of 1.6777 in the previous week. GBPUSD is expected to find its first support at 1.6790, with the next at 1.6711. Resistance exists first at 1.6936, and then at 1.7003.
Going forward, traders in the Pound are expected to keep a close eye on the Bank of England’s interest rate decision, followed by the UK’s growth forecast report from the National Institute of Economic & Social Research.
USD JPY
The USD traded marginally higher against the JPY over the past week, closing at 102.20. The Yen lost ground after the BoJ slashed its growth forecast for Japan for the fiscal year 2015. During the week, the central bank at its interest rate decision left its monetary tools unchanged and reiterated its previous stance that the nation remains on track to achieve its 2% inflation target by the middle of 2015. The Japanese Prime Minister, Shinzo Abe, stated that wages and employment in the nation need to improve in order to substantially shrug-off deflationary risks. He further indicated that the recent sales tax hike did not have much impact on the nation’s spending pattern. On the data front, unemployment rate in Japan remained steady in March, whereas industrial production rebounded at a slower pace in the similar period. Housing starts and construction orders declined in March. The pair traded at a high of 102.89 and a low of 102.03. The pair is expected to find its first support at 101.85, with the next support expected at 101.51. The first resistance is at 102.72, and the next at 103.24.
The minutes of the BoJ’s latest policy meeting would remain on the radar of market participants this week. Separately, a series of macroeconomic data from Japan would also be watched by Yen investors.
USD CHF
USD traded 0.43% lower against the CHF and closed at 0.8780 in the last week. The Swissy inched higher, on the back of encouraging domestic data. The Swiss KOF leading indicator and manufacturing activity improved in April. Also, UBS consumption indicator inched higher in March. Moreover, the Swiss National Bank (SNB) President, Thomas Jordan, indicated that the Swiss Franc’s safe haven status has kept the currency highly valued. He further added that the central bank will continue with its ceiling on the Swiss Franc against the Euro and will take additional measures if necessary to counter the threat of deflation in the nation. During the period, the pair traded at a high of 0.8852 and a low of 0.8769. The first support is at 0.8749, and the next at 0.8717. Resistance exists first at 0.8832, and then at 0.8883.
Ahead in the week, investors are expected to closely track the Swiss consumer price inflation data. Separately, the nation’s jobless rate would also act as a catalyst in determining the direction of the Swiss Franc.
USD CAD
Last week, the USD traded 0.61% lower against the CAD and closed at 1.0972. In Canada, data showed that the economy grew by 0.2% in February, in line with market expectations, after a growth of 0.5% in January. During the week, the BoC Governor, Stephen Poloz, hinted at the possibility of a rate cut despite his belief that the Canadian economic recovery is picking up steam and that disinflationary pressures appear to be waning. He further indicated that the Canadian Dollar was still high in historical terms. USDCAD traded at a high of 1.1041 and a low of 1.0936 in the previous week. The first support is at 1.0925, with the next at 1.0878. The first resistance is at 1.1030, while the next is at 1.1088.
Loonie traders are expected to keep a close tab on the nation’s jobs, housing, trade and manufacturing data during this week.
AUD USD
AUD traded marginally lower against the USD last week, and closed at 0.9277, as disappointing services PMI data from Australia’s key trading partner, China weighed on the Aussie. In Australia, export prices rose 3.6% on the quarter in the first quarter of 2014. The AiG performance of manufacturing index fell to a nine-month low at 44.8 in April, from 47.9 in March. The Housing Industry Association reported that total number of new home sales rose 0.2% in March, following the 4.6% jump in February. During the week, the pair traded at a high of 0.9319 and a low of 0.9210. The first support is at 0.9218, and the next at 0.9160. The first resistance is at 0.9327, and the next at 0.9378.
Aussie traders are expected to experience a busy week ahead, as Australia’s employment, retail sales and trade data would keep them on their toes. Moreover, they would also remain watchful about the Reserve Bank of Australia’s interest rate decision.
Gold
In the prior week, Gold traded 0.27% lower against the USD and closed at USD1299.62, as a fourth consecutive downward revision to the US Fed’s pace of the monthly asset purchases and robust nonfarm payrolls data confirmed speculations that the US economy is gaining steam. The yellow metal’s prices also lost ground, after gold holdings in the largest bullion-backed exchange traded fund, SPDR Gold Trust, touched multi-year low levels in the past week. However, mounting war-like tensions in Ukraine provided some relief to gold prices, capping losses. Furthermore, Fed’s statement that interest rates in the US are expected to remain at the current near zero levels, weighed on the greenback. The yellow metal traded at a high of 1306.77 and a low of 1277.35 in the previous week. Gold is expected to find support at 1282.39 and the next at 1265.16. The first resistance is at 1311.81, while the next is at 1324.00.
In this week, investors would monitor macroeconomic data from the US. Also, developments in Ukraine and Russia would play a key role in determining the near term trend in the yellow metal prices.
Crude Oil
Oil prices traded 0.83% lower against the USD in the last week and closed at USD99.76, as slower-than-expected rise in the US growth and Chinese services activity data dampened the demand prospects for the crude oil from two of its largest consumers. Moreover, reports regarding the resumption of the Libyan crude oil exports in the global markets also eased supply concerns. Furthermore, a larger-than-expected rise in the US crude oil stockpiles, reported by the Energy Information Administration, triggered speculations of reduced demand for crude oil. However, mounting geopolitical unrest between Russia and Ukraine kept losses in check. Oil traded at a high of 102.20 and a low of 98.74 in the previous week. Oil has its first major support at 98.27, while the next support exists at 96.77. The first resistance is at 101.73, and the next at 103.69.
Moving forward, investors are expected to track the global economic news for placing their bets in the commodity. Moreover, oil traders would continue to monitor escalating tensions in Ukraine.
Good trades.
