The highlight of the week was the US Federal Reserve (Fed) and the Bank of Japan’s interest rate decisions. The Fed kept the benchmark interest rates unchanged, while provided very little clue on the future rate hikes in the June meeting and was seen in no rush to raise the rates. Meanwhile, the Federal Open Market Committee (FOMC) observed that the labor market conditions had improved further, although the economic activity had slowed in the nation. Moreover, the central bank insisted that it would continue to closely monitor inflation indicators and global economic and financial developments closely.
Macroeconomic data released during the week indicated that the US economic growth recorded its worst performance in almost two years in the first quarter of 2016, amid a setback in business investment, consumer spending, lower oil prices and overall weak global growth hurt the nation’s growth. Further, the consumer confidence in the US fell in April, showing signs of restrained household spending and the consumer sentiment released by the University of Michigan indicated that the sentiment index declined for a straight fourth month in April, indicating little confidence in the minds of consumers about the US economy.
Meanwhile, the US services PMI expanded in April, but the sector saw only modest growth due to quiet demand and unfavorable economic conditions in the country. Moreover, the Americans filing applications for fresh unemployment benefits rose in the week ended April 22, yet remained at its historically lowest levels.
The Euro ended the week higher on a stronger footing, as the Euro-zone’s economic growth rate doubled in the first quarter of 2016, growing at the fastest pace in almost a year. The growth was supported by a dip in the unemployment rate in March, marking the lowest rate since August 2011. Moreover, the region’s overall economic sentiment rose more-than-expected in April, indicating that the consumers and the businesses were optimistic about the economic conditions in the Eurozone. Meanwhile, the gains in the Euro were kept in check, after Eurozone’s consumer prices dropped on a yearly basis in April, making its way into deflation. Separately, Germany’s consumer confidence increased for the month of May, amid expectations amongst consumers that Eurozone’s largest economy will pick up pace in the coming months.
The Bank of Japan (BoJ) surprised the markets as the central bank kept monetary policy unchanged, with rates at -0.1% and the bond buying program steady at ¥80.00 trillion. The move came as a surprise to the market participants as fresh dose of stimulus was expected in the recent monetary policy meeting. Meanwhile, the BoJ Governor, Haruhiko Kuroda, stated that the central bank remained on track to achieve its 2.0% inflation target.
EURUSD
The EUR traded 2.02% higher against the USD last week, with the pair closing at 1.1450, after the Eurozone’s economy expanded more-than-expected in 1Q 2016 with the gross domestic product rising 0.6% in the first three months of this year. Moreover, the region’s unemployment rate dipped more than market expectations in March. Additionally, the economic and services sentiment indices in Eurozone improved higher than forecast in April, marking its first rise after consecutive three months of decline. Further, the German consumer confidence rose more-than-expected for May amid robust domestic demand. Meanwhile, the nation’s IFO expectations advanced less-than-forecast in April. In other economic news, Eurozone’s consumer prices dropped more-than-expected on an annual basis in April, slipping back into deflation, far away from the ECB’s inflation target of 2.0%. Moreover, the German consumer prices fell in line with market expectations in April and the retail sales dropped unexpectedly in March. Separately, the seasonally adjusted unemployment rate remained unchanged in April. During the previous week, the pair traded at a high of 1.1460 and a low of 1.1224. The pair is expected to find support at 1.1296, and a fall through could take it to the next support level of 1.1142. The pair is expected to find its first resistance at 1.1533, and a rise through could take it to the next resistance level of 1.1615. This week, investors would focus on the Markit’s survey of the manufacturing and services PMI across the Eurozone and retail sales for further cues. Additionally, Germany’s Markit services and the manufacturing PMI’s will also attract market attention.
GBPUSD
Last week, the GBP traded 1.42% higher against the USD and closed at 1.4607, despite UK’s economic growth slowing in the first quarter of 2016, mainly affected by a fall in manufacturing and construction output. Additionally, fear of Brexit in EU’s June referendum also weighed on the nation’s economy. Moreover, UK’s GfK consumer confidence fell to its lowest level in 15 months, indicating a pessimistic attitude amongst UK’s consumer about the whole economic situation in the nation. In other economic news, the CBI distributive trades survey indicated that the retail sales fell at the fastest pace since 2012 in April. Additionally, mortgage approvals recorded a surprising decline in March, falling for a second straight month to a four-year low in March. The GBP hit a high of 1.4672 and a low of 1.4403 against the USD in the previous week. Immediate downside, the first support level is seen at 1.4453, followed by 1.4294, while on the upside, the first resistance level situated in 1.4721, followed by 1.4831. Looking ahead, investors will look forward to Markit survey on the construction and services PMI in the UK for further direction. Moreover, UK’s Markit manufacturing PMI will be looked upon by the investors’.
USDJPY
Last week, the USD traded 4.78% lower against the JPY and closed at 106.47. The Japanese Currency gained ground, after the BoJ surprisingly maintained the benchmark interest rate at -0.1% in its latest monetary policy meeting and kept its bond buying program unchanged at an annual pace of ¥80.00 trillion. On the data front, Japan’s unemployment rate declined in March, falling for the first time in two months, while the job availability reached its best level in 24 years. Moreover, the nation’s industrial production expanded on a monthly basis by the most in five years in March and the National consumer prices excluding fresh food prices fell on an annual basis in the same month, leaving the BoJ’s 2.0% inflation target far behind. In other economic news, Japan’s leading economic index eased more-than-expected in February, declining to the lowest since early 2010. The USD hit a high of 111.90 and a low of 106.28 against the JPY in the previous week. The pair is expected to find support at 104.55, and a fall through could take it to the next support level of 102.61. The pair is expected to find its first resistance at 110.17, and a rise through could take it to the next resistance level of 113.85. Amid a light economic calendar in Japan this week, market participants look forward to the Nikkei manufacturing PMI and monetary base data.
USDCHF
Last week, the USD traded 1.87% lower against the CHF and closed at 0.9599. On the data front, Switzerland’s UBS consumption indicator edged up in March and the KOF leading indicator eased in April. During the previous week, the pair traded at a high of 0.9787 and a low of 0.9568. The pair is expected to find support at 0.9516, and a fall through could take it to the next support level of 0.9432. The pair is expected to find its first resistance at 0.9734, and a rise through could take it to the next resistance level of 0.9870. Going forward, investors this week would monitor Switzerland’s real retail sales and foreign currency reserves for further cues in the Swiss Franc.
USDCAD
The USD fell against the CAD last week, closing 0.91% lower at 1.2555. In economic news, Canada’s economic growth contracted in February, in line with market forecast, marking its first decline since September, amid weakened demand for exported goods and a slowdown in the oil and gas drilling activity in the nation. Other economic data showed that Canada’s raw material price index rose more than expected on a monthly basis in March while the industrial product price index unexpectedly fell in the same period. The pair traded at a high of 1.2719 and a low of 1.2499 during the previous week. The pair is expected to find its first support at 1.2463 and first resistance at 1.2684. The second support is expected at 1.2371 and second resistance at 1.2812. Moving ahead, market participants would concentrate on Canada’s unemployment rate, the RBC manufacturing PMI and Ivey purchasing managers’ index for April, as well as building permits data further direction.
AUDUSD
The AUD weakened against the USD last week, closing 1.39% lower at 0.7603. On the economic front, Australia’s consumer prices eased unexpectedly in 1Q16, its first decline in seven years, giving rise to possibility of further rate cuts by the RBA. Moreover, the import and export price indices fell more-than-expected in first quarter. Additionally, the private sector credit growth came in lower than market expectations in March and the producer prices fell in the three months ending March. The AUD hit a high of 0.7767 and a low of 0.7549 against the USD in the previous week. The pair is expected to witness its first support at 0.7512 and second support at 0.7421, while the first resistance is expected at 0.7730 and second resistance at 0.7858. Moving ahead, market participants will keep a closely monitor the RBA’s interest rate decision, and retail sales as well as trade balance data. Further, traders will watch the AiG performance of construction and services indices data and a budget release scheduled for the week.
Gold
During the previous week, gold traded 4.91% higher and ended at USD1293.53 per ounce, amid a broad weakness in the US Dollar, following Federal Reserve’s uncertainty of a rate hike in the June meeting. The yellow metal witnessed a high of USD1299.00 per ounce and a low of USD1231.30 per ounce in the previous week. The precious metal is expected to find its first support at USD1251.13 per ounce and first resistance at USD1318.83 per ounce. The second support is expected at USD1207.37 per ounce and second resistance at USD1342.77 per ounce.
Crude Oil
Crude oil traded 5.01% higher in the previous week, closing at USD45.92 per barrel, amid increasing hopes of a decline in the global crude glut and that US crude production will decline soon. However, gains in oil prices were kept in check, as rising OPEC crude production outweighed a decline in the US output. The American Petroleum Institute (API) reported that US crude oil inventories declined 1.1mn bls last week, while the US Energy Department reported that US crude oil inventories rose by 2.0mn bls last week to an all-time high of 540.6mn bls. The commodity traded at a high of USD46.78 per barrel and a low of USD42.50 per barrel in the previous week. Immediate downside, the first support level is seen at USD43.40 per barrel, followed by USD40.81 per barrel, while on the upside, the first resistance level situated in USD47.68 per barrel, followed by USD49.37 per barrel.
Good trades.
