The highlight of the week was Britain’s decision to leave the European Union at the historic referendum on June 23. The leave camp won with 51.9% of the vote compared to 48.1% who voted to remain. Following Brexit, UK’s Prime Minister announced his resignation and the Pound declined to its weakest level in nearly three decades. On the other hand, Bank of England’s Governor, Mark Carney, announced that that the central bank would take all the required steps to protect nation’s economy after Brexit decision. Additionally, he also stated that the BoE is ready to provide £250.00 billion of additional funds to support financial markets and the central bank will consider whether to take additional policy responses in the coming weeks.
The greenback ended the week on a stronger footing. Separately, the US Federal Reserve Chief, Janet Yellen, justified the central bank’s cautious approach by stating that the US economy continues to face risks given the recent slowdown in the nation’s employment sector. Moreover, she assured that headwinds holding back the economy will fade away and further gradual increases in interest rates are likely needed. Further, while testifying before the Congress, she sounded more optimistic and indicated that the recent weakness in the US job market is "transitory" and will rebound in the coming months.
Macroeconomic data indicated that manufacturing activity in the US advanced higher-than-expected in June. Further, the number of people applying for the new unemployment benefits declined during the last week, nearing to a 43-year low. Meanwhile, orders for US durable goods dropped more-than-expected in May. Further, consumer sentiment amongst the Americans declined in June, indicating consumers pessimistic view about the economic conditions. Separately, new home sales declined on a monthly basis in May, while existing home sale saw an advance in the same month.
The Euro ended the week in red. Data revealed that growth in the Eurozone’s manufacturing sector advanced in June, while business activity slowed on the back of weaker growth in services sector during the same month. Moreover, Germany’s manufacturing sector expanded unexpectedly in June, while private sector growth slowed at a faster pace in the same month. Meanwhile, the consumer confidence index declined more-than-expected in June. On the other hand, ZEW’s economic sentiment index in Eurozone surged higher in June. Separately, Germany’s ZEW economic sentiment index advanced unexpectedly in June.
EURUSD
During the previous week, the EUR traded 1.42% lower against the USD and ended at 1.1117. Data released indicated that the Eurozone’s Markit manufacturing PMI advanced higher than market expectations in June, while services PMI climbed less than expected in the same month. Moreover, Germany’s manufacturing sector advanced unexpectedly in June, while services activity increased less-than-expected. Further, ZEW survey indicated that economic sentiment rose in the region. On the other hand, consumer confidence dropped more-than-expected in June. Additionally, construction output dropped more-than-expected on a monthly basis in April. Separately, Germany’s ZEW survey showed economic sentiment surged in June, while the current situation index advanced in the same month. Moreover, Ifo business climate index climbed higher in June, while Ifo current assessment index advanced during the same period. The pair traded at a high of 1.1428 and a low of 1.0913 during the previous week. The pair is expected to find its first support at 1.0877 and first resistance at 1.1392. The second support is expected at 1.0638 and second resistance at 1.1668. This week, investors would focus on the sentiment indices in the Eurozone for further cues. Moreover, ECB’s account of monetary policy meeting, unemployment rate, Markit manufacturing PMI and consumer price index will be keenly watched by investors’. Additionally, Germany’s unemployment rate, retail sales, consumer price index, GfK consumer confidence index and Markit manufacturing PMI will attract a lot of market attention.
GBPUSD
Last week, the GBP traded 4.73% lower against the USD and closed at 1.3679. At its historic referendum, Britain decided to exit from the European Union, which saw the currency declining to its lowest level in 31 years. In economic news, UK’s public sector net borrowing reported a deficit in May. Moreover, CBI trends orders book balance improved on a monthly basis in May, marking the best reading since last August. During the previous week, the pair traded at a high of 1.5018 and a low of 1.3229. The pair is expected to find support at 1.2933, and a fall through could take it to the next support level of 1.2186. The pair is expected to find its first resistance at 1.4722, and a rise through could take it to the next resistance level of 1.5764. Looking ahead, investors will look forward to UK’s Gross domestic product data, GfK consumer confidence, consumer credit and Markit manufacturing PMI for further direction.
USDJPY
The USD declined against the JPY last week, closing 1.86% lower at 102.22. The Bank of Japan meeting minutes showed that the central bank expressed doubts on its ability to attain the 2.0% sustained inflation goal. Moreover, the policymakers agreed that the BoJ could afford to take a wait-and-see stance because it would take time for its negative interest rates and debt purchasing program to have an impact. On the data front, Japan’s preliminary reading indicated that manufacturing activity contracted in June. Moreover, the leading economic index rose in April, while coincident index climbed in the same month. The pair traded at a high of 106.84 and a low of 99.02 during the previous week. The pair is expected to find its first support at 98.55 and first resistance at 106.37. The second support is expected at 94.87 and second resistance at 110.51. Moving ahead, market participants look forward to Japan’s industrial production, housing starts and construction orders, unemployment rate, national consumer price index, Nikkei manufacturing PMI and consumer confidence index all scheduled for release this week.
USDCHF
Last week, the USD traded 1.25% higher against the CHF and closed at 0.972. In economic news, Switzerland’s trade surplus expanded at a three month high in May. Moreover, ZEW survey for expectations advanced in June. During the previous week, the pair traded at a high of 0.9804 and a low of 0.9522. The pair is expected to witness its first support at 0.9560 and second support at 0.9400, while the first resistance is expected at 0.9842 and second resistance at 0.9964. Going forward, investors this week would closely monitor Switzerland’s UBS consumption indicator, KOF leading indicator and real retail sales for further cues in the Swiss Franc.
USDCAD
The USD traded 0.85% higher against the CAD last week, with the pair closing at 1.3004. On the data front, Canada’s retail sales rebounded at par with market expectations on a monthly basis in April. Moreover, wholesales sales advanced on a monthly basis in the same month. During the previous week, the pair traded at a high of 1.3099 and a low of 1.2679. The pair is expected to witness its first support at 1.2756 and second support at 1.2507, while the first resistance is expected at 1.3176 and second resistance at 1.3347. Moving ahead, market participants would concentrate on Canada’s Gross domestic product data for further direction in the CAD.
AUDUSD
Last week, the AUD traded 1.07% higher against the USD and closed at 0.7466. The Reserve Bank of Australia meeting minutes indicated that positive economic data, noticeable depreciation in the Australian dollar, rise in housing prices and a more positive view on wages made the RBA hold the benchmark interest rate. In economic news, Westpac leading index advanced on a monthly basis in May. Meanwhile, house price index dropped on a quarterly basis in 1Q 2016. The AUD hit a high of 0.7648 and a low of 0.7306 against the USD in the previous week. The pair is expected to find its first support at 0.7299 and first resistance at 0.7641. The second support is expected at 0.7131 and second resistance at 0.7815. Moving ahead, market participants will keep a close watch on Australia’s new home sales and private sector credit along with AiG performance of manufacturing index for further cues.
Gold
During the previous week, gold traded 1.32% higher and ended at USD1315.75 per ounce, amid a sharp decline in global equity markets after Britain decided to leave the European Union. The yellow metal hit a high of USD1362.60 per ounce and a low of USD1252.80 per ounce in the previous week. Immediate downside, the first support level is seen at USD1260.40 per ounce, followed by USD1201.70 per ounce, while on the upside, the first resistance level situated in USD1370.20 per ounce, followed by USD1421.30 per ounce.
Crude Oil
Last week, crude oil traded 0.71% lower and ended at USD47.64 per barrel, following UK’s decision to exit from the European Union. Moreover, the US Energy Department reported that crude oil inventories fell by 0.9mn bls last week, a smaller than expected decline in the stockpiles and the American Petroleum Institute (API) reported that crude oil inventories declined 5.2mn bls last week. Crude oil witnessed a high of USD50.54 per barrel and a low of USD46.70 per barrel last week. Crude oil is expected to its find support at USD46.00 per barrel, and a fall through could take it to the next support level of USD44.43 per barrel. The yellow metal is expected to find its first resistance at USD49.84 per barrel, and a rise through could take it to the next resistance level of USD52.11 per barrel.
Good trades.
