The greenback ended the week on a weaker footing, ahead of US Federal Reserve meeting scheduled on December 15-16, where investors anticipate policy makers to raise interest rates for the first time in almost a decade.
In economic news, the US initial jobless claims rose more-than-expected to a five-month high level in the week ended 05 December. However, the data will probably bring little change to views of the Fed raising rates next week, as the claims have been below the 300.0K threshold for the 40th straight week, which is normally associated with healthy labor market conditions. Meanwhile, advance retail sales rose in November, after months of lackluster spending, highlighting that the US economy can withstand an interest rate hike. Also, producer prices in the US unexpectedly advanced for the first time in four months, on a monthly basis in November. However, the nation’s wholesale inventories surprisingly declined in October, reflecting decreases in the inventories of both durable and non-durable goods.
The Euro ended the week on stronger footing, after Germany’s final consumer price inflation advanced as expected by 0.1% on a monthly basis in November. Other macroeconomic data released during the week showed that the Eurozone GDP rose 0.3% QoQ in 3Q 2015, driven by a growth in private consumption and government spending, indicating that the region’s economic growth is on the right track. Meanwhile, German industrial production rebounded after two months of declines, but fell short of expectations, indicating that weak demand from emerging markets is adversely affecting a key sector of the Eurozone’s largest economy. Moreover, the nation’s trade surplus narrowed, while exports and imports fell more-than-expected in October. The British Pound ended the week in the green. The BoE left the benchmark interest rate unchanged at a record low of 0.5% and kept the asset purchase facility steady at £375 billion, as it expressed concerns over UK’s subdued inflation and wage growth. Further, the central bank also reiterated that it expected headline inflation to remain below 1.0% until the second half of 2016. In other economic news, Britain’s UK’s NIESR estimated GDP rose 0.6% during the September-November 2015 period, thus paving way for the BoE to raise interest rates in February next year. Also, the nation’s industrial production topped market expectations on a monthly basis in October. However, manufacturing production fell more-than-anticipated on a monthly basis during the same month, thereby indicating a weak start for the sector in the fourth quarter. Additionally, UK’s total trade deficit widened more-than-expected in October, as imports grew at its fastest pace in nearly a year and as the global economic slowdown weighed on demand for exports.
EURUSD
Last week, the EUR traded 1.06% higher against the USD and closed at 1.0989. Macroeconomic data showed that Eurozone GDP rose 0.3% QoQ in 3Q 2015, in line with market expectations, indicating that the region’s economy is gradually moving in the right direction. The growth was mainly attributed to a rise in private consumption and government spending. Additionally, the Euro-zone’s Sentix investor confidence index rose for a second straight month in December, notching its highest level in four months. Separately, the ECB member, Ewald Nowotny, defended the ECB’s recent monetary policy decision and criticized the financial community for having unrealistic expectations. Elsewhere in Germany, weak demand from emerging markets took a toll on the nation’s economy. Data showed that the nation’s industrial production rebounded in October after two months of declines, but failed to meet market expectations. Meanwhile, Germany’s final consumer price inflation advanced as expected by 0.1% on a monthly basis in November. During the previous week, the pair traded at a high of 1.1044 and a low of 1.0796. Immediate downside, the first support level is seen at 1.0843, followed by 1.0695, while on the upside, the first resistance level situated in 1.1091, followed by 1.1191. This week, investors would focus on the Markit manufacturing and services PMI data across the Eurozone to gauge the strength in the European economy. Additionally, the Eurozone’s consumer price inflation data for November would also be keenly watched by investors.
GBPUSD
Last week, the GBP traded 0.79% higher against the USD and closed at 1.5226. The BoE kept benchmark interest rate unchanged at a record low level of 0.5% and kept the size of its bond-buying intact at £375 billion. Also, the minutes of the BoE’s recent monetary policy revealed that the policymakers were in no rush about raising interest rates, pointing towards falling in oil prices and slower wage growth. In other economic news, industrial output was marginally up on a monthly basis in October on the back of stronger production of oil, water and power while manufacturing output unexpectedly fell on an annual basis in October, denting hopes of a balanced economic growth recovery in the fourth quarter. During the previous week, the pair traded at a high of 1.5240 and a low of 1.4956. Immediate downside, the first support level is seen at 1.5041, followed by 1.4857, while on the upside, the first resistance level situated in 1.5325, followed by 1.5425. Looking ahead, investors would closely monitor Britain’s consumer price inflation, retail sales as well as ILO unemployment rate to get better insights in the UK economy.
USDJPY
The USD traded 1.88% lower against the JPY last week, with the pair closing at 120.87. On the macroeconomic front, Japan dodged a recession in the third quarter led by a rise in business investments, which in turn brought about a 0.3% growth in the nation’s final GDP, defying market expectations for a flat reading. Additionally, machine orders in Japan surprisingly advanced for the second consecutive month, on a monthly basis in October, helping ease concerns about weakness in the nation’s capital spending. In other economic news, Japan’s Tankan large manufacturing index surprisingly remained steady in 4Q 2015, suggesting that the BoJ will likely hold off on further easing when it meets for its next monthly policy review. However, the survey also showed both big manufacturers and non-manufacturers expect a deterioration in business conditions in the coming three months due to soft overseas demand, which in turn could cause business firms to pull-back on their capital spending plans. Meanwhile, industrial production in Japan climbed for the second straight month in October, as initially estimated. The USD hit a high of 123.49 and a low of 120.58 against the JPY in the previous week. Immediate downside, the first support level is seen at 119.80, followed by 118.74, while on the upside, the first resistance level situated in 122.71, followed by 124.56. Moving ahead, market participants look forward to the BoJ’s interest rate decision, scheduled to be announced later this week.
USDCHF
The USD fell against the CHF last week, closing 1.33% lower at 0.9837. In economic news, Switzerland’s unemployment rate remained steady at 3.4% in November, as expected. Also, the nation’s foreign currency reserves exceeded investor expectations and reached an all-time high in November. Separately, the SNB kept benchmark interest rate steady at -0.75%, in a bid to prevent the “overvalued” franc from further appreciating and is also likely to continue intervening in currency markets in order to influence the exchange rate situation, if necessary. Further, the central bank expects consumer prices to fall by 0.5% next year before rising in 2017, however less than its September forecast. The USD hit a high of 1.0035 and a low of 0.9803 against the CHF in the previous week. The pair is expected to find its first support at 0.9748 and first resistance at 0.9981. The second support is expected at 0.9659 and second resistance at 1.0124. Going forward, investors this week would closely monitor Switzerland’s ZEW expectations survey and the SECO economic forecast for further cues in the Swiss Franc.
USDCAD
Last week, the USD traded 2.73% higher against the CAD and closed at 1.3742. On the economic front, Canadian housing starts rose unexpectedly in November and building permits surged in October, indicating a growing housing market, despite a tepid economy. Added to this, the nation’s new housing price index advanced more-than-expected on a monthly basis in October. Separately, the BoC Governor, Stephen Poloz, indicated that the central bank might follow the lead of other countries and introduce negative interest rates in order to stimulate the economy. However, he quickly stressed that such a plan is not on the anvil at present. The pair traded at a high of 1.3758 and a low of 1.3385 during the previous week. Immediate downside, the first support level is seen at 1.3498, followed by 1.3255, while on the upside, the first resistance level situated in 1.3872, followed by 1.4002. Moving ahead, market participants would concentrate on Canada’s existing home sales and consumer price inflation data, both for the month of November, for further direction in the CAD.
AUDUSD
The AUD traded 2.05% lower against the USD last week, with the pair closing at 0.7188. In economic news, Australia’s unemployment rate dropped to 5.8% in November, recording its lowest level in more than 18 months, from 5.9% in October. Contrary to market expectations, the economy added 71,400 new jobs, indicating that the nation’s job market continues to plough ahead. Other economic data showed that Australia’s AiG performance of construction index dropped in November while home loans growth dropped in October. Additionally, the Westpac consumer confidence index also edged down in December and the NAB business confidence index improved in November. During the previous week, the pair traded at a high of 0.7341 and a low of 0.7172. Immediate downside, the first support level is seen at 0.7126, followed by 0.7064, while on the upside, the first resistance level situated in 0.7296, followed by 0.7403. Moving ahead, investors would keep a close eye on the RBA minutes of its recent monetary policy meeting along with the new house price index data.
Gold
Gold fell last week, closing 1.07% lower at USD1074.77 per ounce, amid rising expectations that the Fed might increase its benchmark interest rates for the first time in nine years next week. The precious metal traded at a high of USD1086.10 per ounce and a low of USD1061.70 per ounce in the previous week. Gold is expected to its find support at USD1063.70 per ounce, and a fall through could take it to the next support level of USD1050.50 per ounce. The yellow metal is expected to find its first resistance at USD1088.10 per ounce, and a rise through could take it to the next resistance level of USD1099.30 per ounce.
Crude Oil
Crude oil traded 10.88% lower in the previous week, closing at USD35.62 per barrel, after the International Energy Agency (IEA) in its report indicated that the oil market will remain oversupplied for another year. Oil prices remained under pressure, after the OPEC in its monthly report highlighted an increase in its per day production output. Separately, the Energy Information Administration (EIA) showed that US crude oil stocks fell for the first time in 10-week by 3.6 million barrels to 485.8 million barrels in the week ended 04 December, while the American Petroleum Institute (API) indicated that US oil inventories narrowed by 1.9 million barrels last week. Last week, the commodity traded at a high of USD39.76 per barrel and a low of USD35.35 per barrel. Immediate downside, the first support level is seen at USD33.96 per barrel, followed by USD32.45 per barrel, while on the upside, the first resistance level situated in USD38.37 per barrel, followed by USD41.27 per barrel.
Happy trading.
