The highlight of the week was the Bank of Japan’s (BoJ) interest rate decision, as it took global financial markets by surprise after it introduced negative interest rate for the first time and trimmed the interest rate down to -0.1%, thus illustrating the central bank’s goal to end deflation and shore up the nation’s economy.
Last week, the US Federal Reserve kept benchmark interest rate steady at 0.5% and signaled that it was concerned about the ongoing global economic turbulence, but stopped short of ruling out a rate hike in March. It further pointed out that the US labor market conditions are improving and assured that inflation will pick up. It also reiterated its earlier stance that the oil price plunge is transitory.
In other economic news, the US preliminary annualized GDP advanced less-than-expected at an anaemic annual rate of 0.7% on a quarterly basis in 4Q 2015. Also, preliminary durable goods orders declined more-than-expected in December, indicating that economic growth weakened significantly at the end of 2015. Further, the nation’s flash Markit services PMI for January marked an inauspicious start to the New Year, as the service sector expanded at its slowest pace since December 2014. On the other hand, the consumer confidence index surprisingly rose to a 4-month high level in January, indicating that Americans remain upbeat about the economy’s future prospects.
The Euro ended the week on a stronger footing, after the Eurozone’s consumer price inflation advanced in line with investor expectations on an annual basis in January. Meanwhile, in Germany, the flash consumer price index fell in line with market expectations on a monthly basis in January. Further, the nation’s IFO business climate index eased to a 11-month low level during the same period, as German business firms look forward to this year with some anxiety.
The British Pound ended the week in the red. Macroeconomic data released showed that UK’s GDP expanded in line with market expectations on a quarterly basis in Q4 2015 but marked the weakest increase in almost three years, as construction and production output declined during the final quarter. Further, the nation’s seasonally adjusted nationwide house price index slowed more-than-expected in January, while BBA mortgage approvals declined to a seven-month low at the end of last year.
Elsewhere, in China, industrial profits dropped for the seventh consecutive month on an annual basis in December, mainly due to sluggish domestic demand.
EURUSD
During the previous week, the EUR traded 0.34% higher against the USD and ended at 1.0833. In economic news, Eurozone’s consumer price inflation advanced 0.4% in line with market expectations on an annual basis in January. However, the region’s economic sentiment indicator dropped to a five-month low level during the same month, as the slowdown in China weighed on sentiment across the region. Meanwhile, Germany’s GfK consumer confidence index remained steady in February. On the other hand, retail sales surprisingly declined on a monthly basis in December and the nation’s IFO business climate index declined more than expected to a 11-month low in January. Further, the sub-index measuring current business conditions slipped slightly, while the outlook sub-index slumped more than anticipated during the same period. The EUR hit a high of 1.0969 and a low of 1.0790 against the USD in the previous week. The pair is expected to find support at 1.0759, and a fall through could take it to the next support level of 1.0685. The pair is expected to find its first resistance at 1.0938, and a rise through could take it to the next resistance level of 1.1043. This week, investors would focus on the manufacturing and services PMI along with the unemployment rate data across the Euro-zone to gauge the strength in the European economy. Additionally, Germany’s construction PMI as well as factory orders data would also be keenly watched by investors.
GBPUSD
The GBP declined against the USD last week, closing 0.19% lower at 1.4251. On the macroeconomic front, UK’s GDP growth expanded in line with market expectations by 0.5% on a quarterly basis in Q4 2015. However, the nation’s annual pace of growth was the weakest in nearly three years, mainly due to global economic slowdown. Additionally, the nation’s seasonally adjusted nationwide house price index advanced less than expected on a monthly basis in January, while BBA mortgage approvals unexpectedly declined in December. In contrast, the GfK consumer confidence index unexpectedly rose in January, recording its highest level since August 2015. The pair traded at a high of 1.4415 and a low of 1.4149 during the previous week. The pair is expected to witness its first support at 1.4129 and second support at 1.4006, while the first resistance is expected at 1.4394 and second resistance at 1.4537. Looking ahead, investors anxiously await the BoE’s interest rate decision, scheduled to be announced this week. Meanwhile, Britain’s manufacturing, services and construction PMI data would also generate lot of market attention.
USDJPY
During the previous week, the USD traded 1.88% higher against the JPY and ended at 121.08. The Japanese Yen weakened, after the Bank of Japan (BoJ) surprisingly cut interest rate down to -0.1%, buckling under pressure to revive growth in the world's third-largest economy. Further, the central bank added that it will not hesitate to put the interest rate further into negative territory if deemed necessary. In other economic news, Japan’s national consumer price index advanced in line with market expectations by 0.2% on an annual basis, while the unemployment rate remained steady at 3.3% in December. On the other hand, the nation’s final Nikkei manufacturing PMI dropped in January, while flash industrial production index declined more than expected on a monthly basis in December. Additionally, the small business confidence index unexpectedly weakened for the second consecutive month in January, recording its lowest level since June 2015. The USD hit a high of 121.70 and a low of 117.66 against the JPY in the previous week. Immediate downside, the first support level is seen at 118.58, followed by 116.10, while on the upside, the first resistance level situated in 122.63, followed by 124.19. Moving ahead, market participants look forward to Japan’s manufacturing and services PMI, in addition to consumer confidence data, due this week.
USDCHF
The USD rose against the CHF last week, closing 0.82% higher at 1.0245. In economic news, Switzerland’s KOF leading indicator surprisingly advanced in January. Also, the UBS consumption indicator rose in December while trade surplus narrowed more than expected during the same month. During the previous week, the pair traded at a high of 1.0258 and a low of 1.0111. The pair is expected to find support at 1.0150, and a fall through could take it to the next support level of 1.0057. The pair is expected to find its first resistance at 1.0297, and a rise through could take it to the next resistance level of 1.0351. Going forward, investors this week would closely monitor Switzerland’s SVME purchasing managers' index and real retail sales data for further cues in the Swiss Franc. Additionally, the SECO consumer confidence index data would also grab significant amount of market attention.
USDCAD
Last week, the USD traded 1.0% lower against the CAD and closed at 1.4007. The CAD gained ground, after Canada’s GDP growth expanded for the first time in three months, in line with investor expectations by 0.3% on a monthly basis in November, suggesting that the economy rebounded from its slump in recent months. Also, the nation’s industrial product price index fell at a less-than-expected pace on a monthly basis in December. On the other hand, the raw material price index declined more-than-anticipated on a monthly basis during the same period. The USD hit a high of 1.4327 and a low of 1.3948 against the CAD in the previous week. The pair is expected to find support at 1.3862, and a fall through could take it to the next support level of 1.3715. The pair is expected to find its first resistance at 1.4241, and a rise through could take it to the next resistance level of 1.4474. Moving ahead, market participants would concentrate on Canada’s unemployment rate as well as the RBC manufacturing PMI data for further direction in the CAD.
AUDUSD
Last week, the AUD traded 1.03% higher against the USD and closed at 0.7079. In economic news, Australia painted a strong economic picture as the nation’s consumer price index rose more-than-anticipated by 0.4% QoQ in the December quarter, thus reducing the likelihood of an interest rate cut by the RBA next month. On the other hand, the nation’s Westpac leading index declined and private sector credit growth advanced less than expected on a monthly basis in December. Moreover, the AiG performance of manufacturing index registered a drop in January. The pair traded at a high of 0.7143 and a low of 0.6919 during the previous week. The pair is expected to find support at 0.6951, and a fall through could take it to the next support level of 0.6823. The pair is expected to find its first resistance at 0.7175, and a rise through could take it to the next resistance level of 0.7271. Moving ahead, along with the release of RBA’s interest rate decision, market participants would also keep a close eye on Australia’s trade balance and retail sales coupled with the AiG performance of construction and services indices data slated to release this week.
Gold
Gold rose last week, closing 1.85% higher at USD1118.21 per ounce, after the release of downbeat US fourth quarter GDP growth data raised expectations that the Fed will slow on further interest rate cuts. The precious metal traded at a high of USD1128.70 per ounce and a low of USD1098.20 per ounce in the previous week. The yellow metal is expected to witness its first support at USD1101.10 per ounce and second support at USD1084.40 per ounce, while the first resistance is expected at USD1131.60 per ounce and second resistance at USD1145.40 per ounce.
Crude Oil
Crude oil strengthened in the previous week, closing 4.44% higher at USD33.62 per barrel, on prospects of co-operation between the OPEC and non-OPEC members to cut production and curb the ongoing global supply glut. Separately, the Energy Information Administration (EIA) showed that that US crude stockpiles increased by 8.4 million barrels in the week ended 22 January to 494.9 million barrels, while the American Petroleum Institute (API) disclosed that US oil inventories rose by 11.4 million barrels last week. The black metal hit a high of USD34.82 per barrel and a low of USD29.25 per barrel in the previous week. Immediate downside, the first support level is seen at USD30.31 per barrel, followed by USD26.99 per barrel, while on the upside, the first resistance level situated in USD35.88 per barrel, followed by USD38.13 per barrel.
