The highlight of the week was the Federal Reserve Chair, Janet Yellen’s first testimony to the Congress since the December rate hike. The Fed chief highlighted several risks that could throw the US economy off track such as volatile financial markets and the uncertainty over China’s economic growth, thus rendering a dovish undertone to her testimony. She further stated that it is too premature to judge whether those risks are severe enough to alter the Fed's interest-rate policies and that the central bank is prepared to introduce negative interest rates, if economic conditions warrant.
In other economic news, the US advance retail sales rose for the third straight month in January, as sharp wage growth and lower fuel prices led to a rise in consumption. Further, initial jobless claims fell more-than-expected to a seven-week low level in the week ended 06 February 2016, indicating that the nation’s labor market remains on a solid footing despite slowing economic growth and a stock market rout. On the other hand, the preliminary Reuters/Michigan consumer sentiment index surprisingly declined to a four-month low in February, while the NFIB small business optimism index fell more-than-anticipated to a nearly two-year low level in January, amid worries about the near-term outlook for business conditions and sales growth.
The Euro ended the week on a strong footing. On the macroeconomic front, the Eurozone’s seasonally adjusted flash GDP grew at the same pace in 4Q 2015 as in the third quarter, thus raising expectations that the ECB would step up efforts to fuel faster growth in the 19-nation currency bloc when they meet again next month. Further, the region’s industrial sector ended 2015 on a disappointing note as production unexpectedly fell on a monthly basis in December. Meanwhile, Germany’s preliminary GDP grew in line with investor expectations on a quarterly basis in 4Q 2015, as robust domestic consumption enabled the nation to sustain its momentum at the end of last year. On the other hand, Germany’s seasonally adjusted industrial production unexpectedly fell for a second consecutive month in December, underscoring the point that the slowdown in emerging markets is holding back factory activity in the export-driven economy.
The British Pound ended the week in the green. In economic news, UK’s industrial production suffered its sharpest monthly drop in three years, while the nation’s manufacturing production fell for the third straight month in December, denting hopes for a recovery in the sector this year. Moreover, the economic think-tank NIESR, estimated that British economic growth slowed in the three months to January 2016.
EURUSD
The EUR traded 0.91% higher against the USD last week, with the pair closing at 1.1255. On the macroeconomic front, the Eurozone’s seasonally adjusted flash GDP expanded by 0.3% QoQ in 4Q 2015, in line with market expectations. On the other hand, the region’s industrial production unexpectedly fell on a monthly basis in December. Additionally, the Eurozone Sentix investor confidence index fell more-than-expected for the second consecutive month in February, registering its lowest score since April 2015. Meanwhile, in Germany, preliminary GDP data indicated that the nation’s economy grew 0.3% QoQ in the 4Q 2015, at par with investor expectations. In contrast, the nation’s seasonally adjusted industrial production surprisingly dropped on a monthly basis in December. Closely following on its heels, France and Italy too registered a decline in industrial output during the same month, raising fears that the Eurozone economic growth is slowing faster than anticipated, thus exerting further pressure on the ECB to inject additional stimulus at its meeting next month. During the previous week, the pair traded at a high of 1.1377 and a low of 1.1087. The pair is expected to witness its first support at 1.1102 and second support at 1.0949, while the first resistance is expected at 1.1392 and second resistance at 1.1529. This week, investors would focus on the ECB’s account of monetary policy meeting, along with the Eurozone and Germany’s economic sentiment index data, to gauge the strength in the European economy. Additionally, the Eurozone trade balance and preliminary consumer confidence index data would also be keenly watched by investors.
GBPUSD
The GBP advanced against the USD last week, closing 0.06% higher at 1.4509. In economic news, UK’s industrial production fell more-than-expected on a monthly basis in December, hitting its lowest level since September 2012 while manufacturing production surprisingly declined on a monthly basis in December, mainly due to a dip in mining and quarrying activities. Moreover, NIESR estimated that Britain’s GDP advanced 0.4% in the 3-months period ended January 2016, down from a revised rise of 0.5% in the previous quarter. In other economic news, UK’s total trade deficit narrowed in December. Also, the nation’s RICS house price balance index remained steady in January. The pair traded at a high of 1.4580 and a low of 1.4351 during the previous week. The pair is expected to witness its first support at 1.4380 and second support at 1.4252, while the first resistance is expected at 1.4609 and second resistance at 1.4708. Looking ahead, investors await UK’s consumer price inflation and ILO unemployment rate data, scheduled to be released this week. Additionally, Britain’s retail sales, public sector net borrowing and the Rightmove house price index data would also generate lot of market attention.
USDJPY
The USD declined against the JPY last week, closing 3.15% lower at 113.30. In economic news, Japan’s housing loans advanced on an annual basis in Q4 2015. On the other hand, the nation’s preliminary machine tool orders further registered a drop on an annual basis in January.
The USD hit a high of 117.54 and a low of 110.97 against the JPY in the previous week. The pair is expected to find support at 110.34, and a fall through could take it to the next support level of 107.37. The pair is expected to find its first resistance at 116.90, and a rise through could take it to the next resistance level of 120.50. Moving ahead, market participants look forward to the release of Japan’s preliminary Q4 GDP, industrial production and adjusted merchandise trade balance data this week. Moreover, the nation’s machine orders and all industry activity index will also be keenly watched by investors.
USDCHF
The USD traded 1.46% lower against the CHF last week, with the pair closing at 0.9765. In economic news, Switzerland’s seasonally adjusted unemployment rate unexpectedly remained steady in January. Further, the nation’s consumer price index declined for the fifteenth consecutive month on a monthly basis in January. The pair traded at a high of 0.9975 and a low of 0.9661 during the previous week. The pair is expected to find support at 0.9626, and a fall through could take it to the next support level of 0.9487. The pair is expected to find its first resistance at 0.9939, and a rise through could take it to the next resistance level of 1.0113. Moving ahead, investors will look forward to Switzerland’s ZEW economic expectations survey and trade balance data, for further cues.
USDCAD
During the previous week, the USD traded 0.34% lower against the CAD and ended at 1.3863. On the economic front, Canada’s building permits advanced more-than-expected on a monthly basis in December. On the other hand, the nation’s new housing price index rose less-than-anticipated on a monthly basis in December. The pair traded at a high of 1.4017 and a low of 1.3786 during the previous week. Immediate downside, the first support level is seen at 1.3760, followed by 1.3657, while on the upside, the first resistance level situated in 1.3991, followed by 1.4120. Going forward, Canada’s consumer price index, existing home sales and retail sales data, all scheduled to be released this week, would garner lot of market attention.
AUDUSD
During the previous week, the AUD traded 0.41% higher against the USD and ended at 0.7101. Last week, the RBA Governor, Glenn Stevens, in his testimony, reiterated that soft inflation in Australia has provided room to the central bank to cut interest rates further, if needed. He also downplayed worries about the health of Australia’s banks, as their exposure to debt in the oil and gas sector was quite minimal. On the data front, Australia’s NAB business confidence index remained steady in January. However, the NAB business conditions index edged down during the same month, hinting that business sentiment in the nation is hampered partly due to volatile financial markets and worries about economic slowdown in China. On the other hand, the nation’s Westpac consumer confidence index rose in February. Additionally, new home sales advanced for the first time in four-months on a monthly basis in December. Also, the consumer inflation expectation index remained steady in January. The AUD hit a high of 0.7154 and a low of 0.6974 against the USD in the previous week. The pair is expected to find support at 0.6998, and a fall through could take it to the next support level of 0.6896. The pair is expected to find its first resistance at 0.7179, and a rise through could take it to the next resistance level of 0.7257. Looking ahead, market participants await the release of RBA’s February meeting minutes, along with Australia’s seasonally adjusted unemployment rate and Westpac leading index data.
Gold
Last week, gold rose 5.5% to close at USD1237.97 per ounce, after the US Federal Reserve Chair, Janet Yellen, hinted that the Fed might delay further interest rate hikes, as turbulence in global financial markets and uncertainty over China could throw the US economic recovery off-track. The yellow metal witnessed a high of USD1263.90 per ounce and a low of USD1164.50 per ounce in the previous week. The precious metal is expected to find its first support at USD1180.77 per ounce and first resistance at USD1280.17 per ounce. The second support is expected at USD1122.93 per ounce and second resistance at USD1321.73 per ounce.
Crude Oil
Crude oil weakened in the previous week, closing 4.69% lower at USD29.44 per barrel, after the International Energy Agency (IEA) warned that oil prices could decline further as the global supply glut is set to worsen. Separately, the Energy Information Administration (EIA) reported that US crude stockpiles unexpectedly decreased by 0.75 million barrels in the week ended 05 February 2016. On the other hand, the American Petroleum Institute (API) indicated that US oil inventories expanded by 2.4 million barrels last week. However, losses in oil prices were trimmed, after UAE’s Energy Minister, Suhail bin Mohammed al-Mazrouei, stated that OPEC members may be ready to cooperate on a production cut. Last week, the commodity traded at a high of USD31.38 per barrel and a low of USD26.05 per barrel. Crude oil is expected to witness its first support at USD26.21 per barrel and second support at USD23.46 per barrel, while the first resistance is expected at USD31.54 per barrel and second resistance at USD34.12 per barrel.
Good trades.
