Last week, macroeconomic data showed that US consumer prices rebounded less than expected on a monthly basis in March, suggesting that the Federal Reserve (Fed) is likely to stick to its cautious approach on increasing interest rates in the near term. The dismal inflation figures were driven by a fall in clothing prices and lower healthcare inflation. Meanwhile, the core CPI, which excludes food and energy costs, registered its smallest increase since August 2015. Separately, various speeches by key Fed officials painted a mixed picture of the interest rate decision in the US. The Richmond Fed President, Jeffrey Lacker, lent his support for the central bank’s previous forecast of four interest rate increases in 2016. However, the Philadelphia Fed President, Patrick Harker, stated that he expects the central bank to delay further rate hikes until the nation’s inflation rate picks up.
In other economic news, industrial output in the US contracted for a second consecutive month in March, due to a decline in mining and car manufacturing. The weakness in the nation’s industrial sector pointed to cooling in the economy since the start of the year. Additionally, the Reuters/Michigan consumer sentiment index eased for a fourth month in a row in April, highlighting that the Americans are worried about the country’s economic outlook. Also, retail sales unexpected declined in March, indicating a very weak first quarter for the US economy. On the other hand, the number of people applying for new unemployment benefits in the nation fell to its lowest level since 1973 in the week ended April 09, indicating that the labor market continues to strengthen despite a sluggish economy.
The Euro ended the week in the red, after the Euro-zone’s industrial production declined more than market expectations on a monthly basis in February, raising concerns over the overall economic growth in the common-currency region. On the contrary, consumer prices in Germany continued to grow for a second straight month in March. Meanwhile, the Euro-zone’s trade surplus narrowed in February.
The British Pound ended the week on a stronger footing, after the nation’s annual inflation rate unexpectedly edged up to its highest level in 15 months in March, driven by higher air fares and clothing prices due to an early Easter. However, despite the increase, the inflation rate remains well below the Bank of England's (BoE) 2% target. Separately, the BoE’s nine-member monetary policy committee voted unanimously to leave interest rates at their historic low of 0.50%. The minutes of the central bank’s meeting revealed that a vote over Britain’s exit from the European Union (EU) could harm the economic growth and could have a significant impact on the exchange rate and other UK assets. Meanwhile, construction output in the UK slipped in February, however construction of new homes rose at its fastest pace in two years.
EURUSD
During the previous week, the EUR traded 1.0% lower against the USD and ended at 1.1284. In economic news, Germany’s consumer prices rose 0.8%, in line with market expectations on a monthly basis in March. Further, Eurozone’s consumer prices rose on an annual basis in March, but remained below the ECB’s inflation target of 2.0%. In other economic news, the Euro-zone’s industrial activity eased more-than-market expectations in February, but remained on track to grow in the first quarter due to a strong start in 2016. Additionally, the Eurozone’s seasonally adjusted trade surplus narrowed in February. Separately, at the recent International Monetary Fund’s (IMF) meeting, the organization insisted that the region’s member countries should boost growth by increasing spending to handle the slowing global growth. Further, the IMF also expressed concerns regarding the consequences of a possible Brexit from the EU and the declining oil prices. The pair traded at a high of 1.1466 and a low of 1.1233 during the previous week. The pair is expected to witness its first support at 1.1189 and second support at 1.1094, while the first resistance is expected at 1.1423 and second resistance at 1.1561. This week, investors would keep a watch on the ECB’s interest rate decision and monetary policy statement in its April meeting. Moreover, investors would monitor the Markit services PMI and manufacturing PMI in the Eurozone for further direction. Additionally, the current account balance, the ZEW economic sentiment of the Euro-zone and Germany would be on investors’ radar.
GBPUSD
Last week, the GBP traded 0.54% higher against the USD and closed at 1.4203, after consumer prices climbed in the UK rose 0.5%, its highest level for 15 months on an annual basis in March, but remained far below BoE’s inflation target of 2.0%. Separately, the Bank of England kept the key interest rate steady at 0.5% and the quantitative easing program on hold at £375.00bn. Further, the central bank warned that the Britain’s exit from the EU could seriously hurt the economic growth in the nation and weigh heavily on the Pound. The BoE minutes indicated that the Brexit could result in slow economic growth in the second quarter and could be seen affecting investment decisions. Separately, the IMF’s, Managing Director, Christine Lagarde, stated that UK’s exit from the EU was one of the reasons for a weaker global outlook and urged Britain to stay in the EU, as uncertainty surrounding the matter was already weighing on UK’s economy. The pair traded at a high of 1.4349 and a low of 1.4091 during the previous week. The pair is expected to witness its first support at 1.4080 and second support at 1.3956, while the first resistance is expected at 1.4338 and second resistance at 1.4472. Looking ahead, investors will focus on UK’s ILO unemployment rate and claimant count rate for further cues. Moreover, retail sales, public sector net borrowing and CBI trades survey will also attract market attention.
USDJPY
Last week, the USD traded 0.65% higher against the JPY and closed at 108.79. In IMF’s recent meeting, the MD, Christine Lagarde, announced that the organization was carefully watching Japapn’s foreign currency trading for signs of excessive volatility. The agency lowered Japan’s economic growth outlook to 0.5% from its earlier forecast of 1%. For 2017, the IMF projected Japanese economy to shrink 0.1% on the implementation of additional consumption tax. On the data front, Japan’s industrial output tumbled in February, contracting the most since March 2011, due to lower export demand while the nation’s capacity utilization also declined in February. The USD hit a high of 109.74 and a low of 107.63 against the JPY in the previous week. Immediate downside, the first support level is seen at 107.69, followed by 106.61, while on the upside, the first resistance level situated in 109.80, followed by 110.82. Moving ahead, market participants look forward to Japan’s adjusted merchandise trade balance, imports and exports and the Nikkei manufacturing PMI all scheduled for release this week.
USDCHF
Last week, the USD traded 1.6% higher against the CHF and closed at 0.968. On the data front, Switzerland’s producer and import prices eased less-than-expectations on an annual basis in March. The USD hit a high of 0.9691 and a low of 0.9498 against the CHF in the previous week. Immediate downside, the first support level is seen at 0.9554, followed by 0.9429, while on the upside, the first resistance level situated in 0.9747, followed by 0.9815. Going forward, investors this week would keep a watch on Switzerland’s ZEW survey for expectations and trade balance for further cues.
USDCAD
Last week, the USD traded 1.3% lower against the CAD and closed at 1.282. The Bank of Canada kept the benchmark interest rate unchanged at 0.5% during its latest monetary policy meeting. The central bank further upgraded its economic outlook for 2016 as it anticipated new stimulus measures from the government outweighing economic problems. In other economic news, the manufacturing shipments in Canada eased more than expectations on a monthly basis in February and existing home sales advanced in the same period. The pair traded at a high of 1.3018 and a low of 1.2745 during the previous week. The pair is expected to find support at 1.2705, and a fall through could take it to the next support level of 1.2589. The pair is expected to find its first resistance at 1.2978, and a rise through could take it to the next resistance level of 1.3135. Moving ahead, market participants would closely monitor consumer price index, retail sales and wholesale sales for further direction in the CAD.
AUDUSD
During the previous week, the AUD traded 2.24% higher against the USD and ended at 0.7723, after Australia’s unemployment rate fell in March and the employment levels climbed higher than estimates during the same month. Other economic data showed that consumer’s inflation expectations rose in April and the NAB’s business confidence climbed in March. Additionally, the Reserve Bank of Australia’s financial stability review indicated that the country’s financial system was in good shape andthe household resilience remained robust supported by job growth and low rates, while the resources sector has considerably declined. In other economic news, the number of home loans approved in Australia grew in February, indicating a solid demand in the housing market. Meanwhile, the consumer confidence in Australia eased in April, indicating a pessimistic view about the Australian economy in people’s mind. The AUD hit a high of 0.7739 and a low of 0.7528 against the USD in the previous week. The pair is expected to find support at 0.7589, and a fall through could take it to the next support level of 0.7452. The pair is expected to find its first resistance at 0.7800, and a rise through could take it to the next resistance level of 0.7875. Moving ahead, market participants will keep a close watch on Australia’s CB leading indicator and the RBA recent meeting minutes for further direction. Moreover, the Westpac leading index and NAB’s business confidence for the first quarter will grab market attention.
Gold
Gold fell last week, closing 0.54% lower at USD1233.99 per ounce, after rising higher earlier in the week due to a weakness in the US Dollar. Meanwhile, bullion investors look forward to US macroeconomic data for further clues on how the Fed will proceed on monetary policy. The yellow metal hit a high of USD1264.70 per ounce and a low of USD1225.40 per ounce in the previous week. The yellow metal is expected to witness its first support at USD1219.23 per ounce and second support at USD1202.67 per ounce, while the first resistance is expected at USD1258.53 per ounce and second resistance at USD1281.27 per ounce.
Crude Oil
Last week, crude oil strengthened 1.61% to close at USD40.36 per barrel, amid hopes that Sunday’s meeting in Doha would be fruitful and the top oil producers would reach an output agreement. Separately, the US Energy Department reported that US crude oil inventories rose more than anticipated by 6.60mn bls last week and the American Petroleum Institute (API) reported that US crude oil inventories advanced by 6.20mn bls last week. Meanwhile, Baker Hughes reported that US oil rig count fell by 3 to 440 last week. Last week, the commodity traded at a high of USD42.42 per barrel and a low of USD39.25 per barrel. Crude oil is expected to witness its first support at USD38.96 per barrel and second support at USD37.52 per barrel, while the first resistance is expected at USD42.13 per barrel and second resistance at USD43.86 per barrel.
Good trades.
