Weekly Forex Update
The highlight of the week was the European Central Bank’s (ECB) monetary policy decision after the central bank kept the benchmark interest rate, deposit rate and marginal lending facility rate on hold. However, the ECB President, Mario Draghi, kept the room open for a future rate cut and brushed off Germany’s criticism over his ultra-loose monetary policy. Further, he stated that uncertainty regarding Brexit would continue to weigh heavily on financial markets at least till the day of referendum. Additionally, he mentioned that the consequences of UK’s exit could impact the Eurozone’s economy minimally.
The Euro traded ended the week in red, following mixed private sector activity data in the Euro-zone and Germany. Data indicated that Eurozone’s manufacturing as well as services activity quickened less than market forecasts in April, indicating slower pace of growth in the region. On the other hand, the ZEW’s survey indicated that the economic sentiment in the Eurozone climbed to a three month high in April and the consumer confidence rose slightly in the same month to stop three months of decline. In Germany, the ZEW survey for economic sentiment improved higher than forecast in April, rising for the second straight month, indicating modest economic growth in the months ahead. Meanwhile, the producer prices in the nation fell in March, registering its sharpest fall in over six years.
The US Dollar ended the week on a strong footing, after the number of Americans applying for fresh unemployment benefits declined to its lowest levels in the past 4 decades last week, pointing towards continued development and a robust US labor market. On the other hand, the Markit manufacturing PMI unexpectedly fell in April, registering its lowest level in six and a half years. Moreover, the Chicago National Activity index edged lower in March and the Philadelphia manufacturing index slipped back into the contraction territory in April, suggesting that the nation’s manufacturing sector is still struggling.
In other economic news housing starts eased more-than-expected in March and the building permits for new home constructions touched a one-year low in the same month. The figures suggested a slowing housing market with signs of a slowdown in the first quarter economic growth. On the contrary, existing home sales rose on a monthly basis in March and the housing price index advanced in February.
The British Pound ended the week in green. Data indicated that the claimant count in the UK unexpectedly climbed for the first time since mid-2015 in March. Meanwhile, unemployment rate in the nation remained unchanged and in line with estimates in February. Moreover, the BoE Governor, Mark Carney, stated that Britain’s exit from the European Union could be a hindrance to UK’s economic growth, as it might lead to lower growth in the nation.
EURUSD
The EUR traded 0.53% lower against the USD last week, with the pair closing at 1.1224. The European Central Bank (ECB) held the main refinancing interest rate at 0.0%. In other economic news, the preliminary estimate of the manufacturing as well as services activity in the Euro-zone unexpectedly slowed in April, indicating that the single-currency region’s economic recovery is cooling. Meanwhile, Germany’s manufacturing PMI came in above market expectations in April while the services PMI missed consensus estimates. Meanwhile, the nation’s ZEW economic sentiment improved more-than-expected in April and producer prices dropped on an annual basis in March. Other economic data showed that the region’s consumer confidence improved marginally in April to end three months of decline. However, the index remains below the levels that prevailed throughout 2015. During the previous week, the pair traded at a high of 1.1394 and a low of 1.1218. The pair is expected to find support at 1.1165, and a fall through could take it to the next support level of 1.1104. The pair is expected to find its first resistance at 1.1341, and a rise through could take it to the next resistance level of 1.1456. This week, investors would keep a watch on the Eurozone’s industrial and consumer confidence, services and economic sentiment indicator for further cues. Moreover, the region’s as well as Germany’s unemployment rate and consumer price index data will grab market attention.
GBPUSD
During the previous week, the GBP traded 1.4% higher against the USD and ended at 1.4402. On the macro economic front, Britain’s unemployment advanced for the first time in seven months, signaling that the UK’s upcoming vote to leave the EU referendum was weighing heavily on the jobs market. The unemployment rate steadied at a level of 5.1% and the total average weekly earnings growth remained subdued in the three months to February, thus indicating sluggish wage growth. In more economic news, retail sales dropped on a monthly basis in March as households cut back on food and clothes, suggesting that consumers are less optimistic about the UK economy. Further, the public sector net borrowing fell more-than-expected in March and the Rightmove house prices advanced to a record high in April. Separately, the BoE Governor, Mark Carney, indicated that the decision to quit the EU could be a struggle for UK’s economic growth. He indicated that consequences of Brexit included pressures on Britain's record current account deficit, and liquidity in financial markets. The pair traded at a high of 1.4454 and a low of 1.4131 during the previous week. Immediate downside, the first support level is seen at 1.4205, followed by 1.4007, while on the upside, the first resistance level situated in 1.4527, followed by 1.4651. Looking ahead, investors will focus on UK’s preliminary gross domestic product, GfK’s consumer confidence, mortgage approvals and Nationwide housing prices and CBI distributive trades survey for future direction in the Pound.
USDJPY
During the previous week, the USD traded 2.77% higher against the JPY and ended at 111.81. On the data front, Japan’s merchandise trade surplus expanded less-than-expected in March. On the other hand, the exports fell for a straight six month in March, but the sharper decline was seen in the imports for the same month. Moreover, the Nikkei manufacturing PMI contracted further at the quickest pace in more-than three years in April. Further, the tertiary industry index eased less-than-expected on a monthly basis in February. The USD hit a high of 111.81 and a low of 107.84 against the JPY in the previous week. The pair is expected to witness its first support at 109.14 and second support at 106.50, while the first resistance is expected at 113.11 and second resistance at 114.45. Moving ahead, market participants look forward to the Bank of Japan’s (BOJ) interest rate decision & monetary policy statement along with the BOJ outlook report for further cues. Moreover, Japan’s unemployment rate, industrial production, and national consumer price index would be keenly observed by investors this week.
USDCHF
The USD traded 1.05% higher against the CHF last week, with the pair closing at 0.9782. On the data front, Switzerland’s ZEW index for economic expectations advanced in April, marking its highest reading in 2016, thus indicating improved outlook for the Swiss economy, Meanwhile, the nation’s trade surplus narrowed in March. The USD hit a high of 0.9797 and a low of 0.9585 against the CHF in the previous week. The pair is expected to find its first support at 0.9647 and first resistance at 0.9860. The second support is expected at 0.9510 and second resistance at 0.9935. Going forward, investors this week would keep a watch on Switzerland’s UBS consumption indicator and KOF leading indicator for further cues.
USDCAD
The USD traded 1.17% lower against the CAD last week, with the pair closing at 1.2670. In economic news, Canada’s retail sales grew unexpectedly in February, a consecutive second increase, indicating a positive sign for the Canadian economy, as it is on track to achieve robust growth in the first quarter. Moreover, the nation’s consumer prices rose more than expected by 1.3% on a yearly basis in March, amid lower energy prices. Further, the Bank of Canada’s consumer prices advanced 0.7% on a monthly basis in March. Meanwhile, the wholesale sales dropped on a monthly basis in February. During the previous week, the pair traded at a high of 1.2992 and a low of 1.2593. The pair is expected to find its first support at 1.2510 and first resistance at 1.2909. The second support is expected at 1.2352 and second resistance at 1.3150. Moving ahead, market participants would closely monitor Canada’s gross domestic product, the industrial product price and raw material price indices for further direction in the CAD.
AUDUSD
During the previous week, the AUD traded 0.18% lower against the USD and ended at 0.7709, after Australia’s CB leading indicator declined in February and the Westpac leading indicator dropped on a monthly basis in March, still indicating a below trend growth in Australian economy. Moreover, the National Australian Bank’s business confidence dipped in 1Q16. Separately, the Reserve Bank of Australia’s recent monetary policy meeting minutes indicated that board members agreed that the current setting of monetary policy remained appropriate on the back of reasonable prospects for continued growth in the Australian economy. The central bank reiterated that continuing low inflation could allow for a future rate cut if the nation’s jobs sector needed a boost. Meanwhile, the monetary authority also warned that appreciating exchange rate could complicate progress in activity rebalancing towards the non-mining sectors of the economy. During the previous week, the pair traded at a high of 0.7836 and a low of 0.7635. Immediate downside, the first support level is seen at 0.7616, followed by 0.7525, while on the upside, the first resistance level situated in 0.7818, followed by 0.7928. Moving ahead, market participants will keep a close watch on Australia’s consumer price index and private sector credit growth data for further direction.
Gold
During the previous week, gold traded 0.10% lower and ended at USD1233.03 per ounce, asa broad strength in the greenback, reduced demand for the precious yellow metal. Meanwhile, upbeat US initial jobless claims data raised speculation that the Fed may raise interest rates earlier than expected. The yellow metal hit a high of USD1272.40 per ounce and a low of USD1228.50 per ounce in the previous week. Immediate downside, the first support level is seen at USD1217.33 per ounce, followed by USD1200.97 per ounce, while on the upside, the first resistance level situated in USD1261.23 per ounce, followed by USD1288.77 per ounce.
Crude Oil
Last week, crude oil strengthened 8.35% to close at USD43.73 per barrel, although, the much awaited top oil producers meeting in Doha on April 17, did not materialize and further raised oversupply concerns as Saudi Arabia demanded that Iran should join in the oil output agreement. Meanwhile, a strike in Kuwait by the oil and gas workers went on for 3 days which cut Organization of Petroleum Exporting Countries’(OPEC) crude production by half. Moreover, the US Energy Department reported that US crude oil inventories rose less than anticipated by 2.1mn bls to 538.6mn bls last week, while the American Petroleum Institute (API) reported that crude oil inventories advanced by 3.1mn bls last week. The commodity traded at a high of USD44.49 per barrel and a low of USD39.35 per barrel in the previous week. Crude oil is expected to witness its first support at USD40.57 per barrel and second support at USD37.39 per barrel, while the first resistance is expected at USD45.71 per barrel and second resistance at USD47.67 per barrel.
Good trades.
