The highlight of the week was the US Federal Reserve’s interest rate decision which was maintained status quo in wake of recent global economic and financial pressures that have threaten the US economy growth. The Fed, after a two-day meeting of its policy-making committee, scaled back its interest rate guidance to just two rate rises in 2016, lower than the four it had mentioned after the December FOMC meet. However, the Fed noted that the nation’s labor market was strengthening and the economy had continued to chug at a moderate pace despite facing risks from an uncertain global economy and financial markets. Meanwhile, the central bank expects US consumer prices to reach the 2% target in two to three years but trimmed its estimate of GDP growth in 2016 to 2.2% from 2.4%.
US macroeconomic data showed that the core consumer price index unexpectedly managed to tick higher on a yearly basis in February, adding to signs that inflation is moving closer to the Fed’s target. On the other hand, consumer prices on a monthly basis fell in the same month, largely due to a slide in gasoline prices. Meanwhile, retail sales in the country declined less than anticipated in February, suggesting that the economy remained on solid ground. Another set of data showed that industrial production in the US contracted more than forecasts, as untimely warm weather and the energy sector’s slump weighed on the industrial production. Separately, housing starts in US climbed more than expected on a monthly basis in February, reaching its highest level since September.
The Euro ended the week on a stronger footing, after the final estimate of the Euro-zone’s core consumer prices were revised upwards on a yearly basis in February. On the other hand, year on year price growth remained in negative territory in the same month, way below the ECB’s 2% target, raising concerns about the health of the Eurozone economy. Meanwhile, industrial production in the region bounced back strongly on a monthly basis in January, notching its highest rate since January 2010.
The BoE kept the key interest rate unchanged at a historic low of 0.5%, dashing speculation that the one or more of the nine-member Monetary Policy Committee (MPC) could be moving towards a first rate hike. Also, the central bank board members unanimously agreed to keep its bond-buying scheme intact at £375 billion. Additionally, the minutes of the BoE’s recent policy meeting indicated that the growing uncertainty over a “Brexit” has significantly contributed in recent decline in the value of the Pound and could hit economic demand.
EURUSD
During the previous week, the EUR traded 1.08% higher against the USD and ended at 1.1271, after Eurozone’s consumer price inflation rose more than anticipated on a monthly basis and core consumer price inflation also advanced on a yearly basis in February. Additionally, Eurozone’s industrial production rose more-than-expected on a monthly basis in January, led by increased output of capital goods, such as equipment and machinery, growing at its fastest rate in more-than six years. Moreover, employment in Eurozone increased on a quarterly basis in fourth-quarter of 2015. However, annual inflation remained weak in the same month. Meanwhile, construction activity in the region registered a rise in nearly four years, while the trade balance declined in January. The pair traded at a high of 1.1343 and a low of 1.1058 during the previous week. The pair is expected to witness its first support at 1.1104 and second support at 1.0938, while the first resistance is expected at 1.1390 and second resistance at 1.1509. This week, investors would keep an eye on the manufacturing and services PMI data across the Euro-zone to gauge the strength in the European economy. Additionally, the ZEW survey of consumer sentiment in Eurozone and Germany will also be eyed by investors.
GBPUSD
The GBP advanced against the USD last week, closing 0.71% higher at 1.4475. The BoE opted to keep benchmark interest rate unchanged at 0.5%, after all nine members of the Bank's Monetary Policy Committee (MPC) voted to keep rates at their record low. Meanwhile, the BoE minutes of its latest monetary policy meeting showed that increased uncertainty in the run up to the referendum on UK’s membership in the EU had weighed on the Pound and could slow the nation’s economic growth. In other economic news, Britain’s unemployment rate held steady at 5.1% in the three months ended January, the lowest level since 2006 and weekly earnings edged up more than expected as the labor market continued to improve. The GBP hit a high of 1.4516 and a low of 1.4053 against the USD in the previous week. The pair is expected to find support at 1.4182, and a fall through could take it to the next support level of 1.3886. The pair is expected to find its first resistance at 1.4644, and a rise through could take it to the next resistance level of 1.4811. Looking ahead, investors would keep a close eye on UK’s consumer prices as well as retail sales data. Also, the nation’s mortgage approvals and public sector net borrowing data would also grab market attention.
USDJPY
Last week, the USD traded 1.99% lower against the JPY and closed at 111.55. The BoJ decided to keep its monetary stance unchanged, despite risks to the nation’s economic growth. The central bank downgraded the economic as well as inflation expectations and admitted that pick-up in exports had paused, mainly due to the effects of the slowdown in emerging economies, opening the door to further action in months ahead to ignite growth. Separately, the BoJ minutes of its January policy meeting indicated that board members had a debate on whether to adopt negative interest rate policy or to expand the massive asset-buying programme and eventually decided to implement the former option. The decision to adopt negative rates was passed by a 5-4 vote. Macroeconomic data released during the week showed that industrial production in Japan contracted again while the tertiary industry index rebounded stronger than expected on a monthly basis in January. The pair traded at a high of 114.15 and a low of 110.67 during the previous week. Immediate downside, the first support level is seen at 110.09, followed by 108.64, while on the upside, the first resistance level situated in 113.58, followed by 115.61. Moving ahead, market participants look forward to the release of Japan’s National consumer prices as well as the manufacturing PMI data. Investors would also monitor Japan’s coincident as well as leading economic indices data for further cues.
USDCHF
The USD traded 1.38% lower against the CHF last week, with the pair closing at 0.9691. The Swiss National Bank (SNB) left the benchmark interest rate unchanged at 0.75%, at par-with market expectations and maintained the target range for the three month Libor between -1.25% and -0.25%. The central bank indicated the Swiss franc continues to be slightly overvalued, while lowered the economic forecast and expected major deflation amid cheaper oil and slowdown in global growth. The State Secretariat for Economic Affairs downgraded Switzerland’s growth outlook as there was no clear sign of significant growth in global economy. The GDP is expected to grow at 1.4% this year down from 1.5% projected earlier and for 2017 cut the growth outlook to 1.8% from1.9%. The pair traded at a high of 0.9916 and a low of 0.9651 during the previous week. Immediate downside, the first support level is seen at 0.9591, followed by 0.9489, while on the upside, the first resistance level situated in 0.9855, followed by 1.0018. Going forward, investors this week would closely monitor Switzerland’s trade balance and the ZEW survey’s expectations for further direction in the Swiss Franc.
USDCAD
During the previous week, the USD traded 1.72% lower against the CAD and ended at 1.3003. In economic news, Canada’s annual inflation rate slowed to 1.4% in February down from 2.0% in January, mainly due to falling gasoline prices. However, core consumer prices on a monthly basis edged up while on a yearly basis it fell in February. Another set of macroeconomic data indicated that retail sales in the nation rebounded stronger than expected on a monthly basis, marking its biggest one-month gain in close to six years in January. Other economic data showed that Canadian manufacturing shipments rose more than anticipated on a monthly basis in January. Meanwhile, wholesale sales unexpectedly remained flat in the same period. During the previous week, the pair traded at a high of 1.3406 and a low of 1.2923. The pair is expected to witness its first support at 1.2816 and second support at 1.2629, while the first resistance is expected at 1.3299 and second resistance at 1.3594. Moving ahead, market participants would concentrate on Canada’s unemployment rate as well as building permits data for further direction in the CAD.
AUDUSD
During the previous week, the AUD traded 0.56% higher against the USD and ended at 0.7603. The minutes of the RBA’s recent monetary policy meeting showed that the board members saw reasonable prospects for continued growth in the nation but reiterated that prolonged low inflation would provide scope to ease monetary policy further, if needed. Meanwhile, the board members remained cautious on whether the Australian labor market can continue its improvement over the coming months. Macroeconomic data showed that Australia’s unemployment rate unexpectedly dropped back to 5.8% in February from 6.0% recorded in the preceding month, as fewer people looked for work, thereby suggesting that the underlying labor market conditions would keep the RBA on the sidelines for the time being. The AUD hit a high of 0.7682 and a low of 0.7415 against the USD in the previous week. Immediate downside, the first support level is seen at 0.7452, followed by 0.7300, while on the upside, the first resistance level situated in 0.7720, followed by 0.7835. Moving ahead, the RBA Governor, Glenn Stevens’ speech would be closely watched by the market participants. Additionally, the nation’s house price index would be on investor’s radar.
Gold
Gold rose last week, closing 0.48% higher at USD1255.40 per ounce, on the back of broad weakness in the greenback, after the Fed scaled back interest rate hike expectations at its recent FOMC meeting. The yellow metal hit a high of USD1271.90 per ounce and a low of USD1226.00 per ounce in the previous week. The yellow metal is expected to witness its first support at USD1230.70 per ounce and second support at USD1205.40 per ounce, while the first resistance is expected at USD1276.60 per ounce and second resistance at USD1297.20 per ounce.
Crude Oil
Crude oil strengthened in the previous week, closing 2.44% higher at USD39.44 per barrel, on renewed expectations, after Qatari oil minister, Mohammed Bin Saleh Al-Sada, stated that producers from within and outside the Organization of the Petroleum Exporting Countries (OPEC) will meet in April to discuss plans for a freeze in output. The Energy Information Administration (EIA) showed that US crude oil stocks advanced by 1.3 million barrels to 523.2 million barrels in the week ended 11 March, while the American Petroleum Institute (API) indicated that the nation’s oil inventories rose less than anticipated by 1.5 million barrels to 523.0 million barrels last week. The commodity traded at a high of USD41.20 per barrel and a low of USD35.96 per barrel in the previous week. The commodity is expected to find its first support at USD36.47 per barrel and first resistance at USD41.71 per barrel. The second support is expected at USD33.60 per barrel and second resistance at USD44.08 per barrel.
Good trades.
