The highlight of the week were monetary policy meetings by major central banks- European Central Bank, Bank of Canada and Reserve Bank of Australia.
The European Central Bank kept the benchmark interest rate and asset-purchase program unchanged during its monetary policy meeting. Moreover, the ECB President, Mario Draghi, indicated that interest rates are likely to remain at present levels or lower for an extended period and well past the horizon for its asset purchases. Additionally, ECB raised its growth forecast for Eurozone slightly this year, while slashed its forecasts for 2017 and 2018.
In other economic news, the economic expansion in Eurozone slowed in the second quarter of 2016. Further, the final Markit services PMI was revised lower in August. On the other hand, the region’s Sentix investor confidence index rose more-than-expected in September to its highest level in three months. Moreover, retail sales rebounded strongly in July, its highest monthly increase this year. Separately, Germany’s industrial production dropped unexpectedly in July from June, raising worries about a slowing economy at the end beginning of third quarter. Meanwhile, factory orders indicated a turnaround in July from June.
Macroeconomic data indicated that ISM non-manufacturing PMI in the US expanded at a slower pace in August, its lowest reading since February 2010. Meanwhile, the number of Americans filing for new unemployment benefits surprisingly declined last week, pointing towards a strong labor market. Moreover, consumer credit change grew more-than-expected in August. Additionally, the final wholesale inventories came in line with previous estimates in July. Further, MBA mortgage applications advanced during the week. Separately, the US Fed’s Beige Book report indicated that wage pressures in most of the central bank's 12 districts remained "fairly modest" and were expected to remain so over the coming months. Moreover, the US Fed of Boston President, Eric Rosengren, backed gradual interest rate hikes to avoid overheating the US economy. He added that failure to do so could shorten the duration of the nation’s recovery.
The Pound ended the week on a lower footing, after NIESR estimate indicated that UK’s economy expanded 0.3% in the three months to the end of August 2016, compared to 0.4% rise in the previous three months. Moreover, manufacturing production fell more-than-expected to its fastest pace in a year in July, while industrial production advanced slightly in the same month. Further, the nation’s services industry rebounded strongly in August entering expansion territory. Additionally, the latest BoE’s survey showed that the expected annual inflation rate for the next 12 months rose for August from the previous quarter.
EURUSD
The EUR traded 0.69% higher against the USD last week, with the pair closing at 1.1233. The European Central Bank kept the key interest rate unchanged and bond-buying program intact at its recent monetary policy meeting. On the data front, the final reading of Eurozone’s gross domestic product came in line with preliminary estimates in 2Q16. Moreover, the final Markit services PMI expanded at a slower pace than previously estimated in August. On the other hand, Sentix investor confidence advanced more-than-expected for September. Further, retail sales rebounded on a monthly basis in July. Elsewhere in Germany, industrial production dropped on a monthly basis in July. Moreover, the final reading of Markit services PMI was revised lower in August than previously estimated. Further, the nation’s trade surplus shrank in July. Meanwhile, the nation’s factory orders rebounded less than expected on a monthly basis in July. During the previous week, the pair traded at a high of 1.1327 and a low of 1.1139. The pair is expected to find its first support at 1.1139 and first resistance at 1.1327. The second support is expected at 1.1045 and second resistance at 1.1421. This week, investors would focus on Eurozone’s consumer price index and trade balance data for further direction. Moreover, the region’s industrial production and ZEW’s economic sentiment index will be on investors’ radar. Additionally, Germany’s consumer price inflation data and ZEW’s survey on current situation and economic sentiment index will attract market attention.
GBPUSD
Last week, the GBP traded 0.2% lower against the USD and closed at 1.3267. In economic news, NIESR estimated that UK’s GDP expanded 0.3% in three months to August, lower than 0.4% rise in the previous three months. Moreover, manufacturing production fell more-than-expected on a monthly basis in July, while industrial production advanced on a monthly basis in the same month. On the other hand, the BoE’s latest survey showed that the expected annual inflation rate for the next 12 months rose in August. Moreover, the Markit services PMI expanded in August after contracting in the previous month. Further, total trade deficit narrowed less than expected in July. The GBP hit a high of 1.3445 and a low of 1.3240 against the USD in the previous week. The pair is expected to witness its first support at 1.3190 and second support at 1.3112, while the first resistance is expected at 1.3395 and second resistance at 1.3522. Going forward, investors will closely watch the Bank of England’s interest rate decision for further direction in the Pound. Moreover, UK’s consumer price index, ILO unemployment rate and claimant count data along with retail sales will generate a lot of market attention.
USDJPY
The USD declined against the JPY last week, closing 1.18% lower at 102.69. On the data front, the final reading on Japan’s annualized gross domestic product was revised higher on a quarterly basis in 2Q 2016. Meanwhile, the nation’s trade surplus narrowed on a BOP basis in July. Additionally, the leading economic index eased slightly in July, while the coincident index advanced in the same month. The pair traded at a high of 104.05 and a low of 101.21 during the previous week. The pair is expected to find its first support at 101.25 and first resistance at 104.09. The second support is expected at 99.81 and second resistance at 105.49. Moving ahead, market participants look forward to Japan’s machinery orders and industrial production data scheduled for release this week.
USDCHF
During the previous week, the USD traded 0.54% lower against the CHF and ended at 0.9756. In economic news, Switzerland’s economic growth doubled in the second quarter of 2016, accelerating at its fastest pace since 2014. Moreover, consumer price index dropped in line with expectations on a monthly basis in August. Further, the nation’s unemployment rate advanced unexpectedly on a monthly basis in August. The USD hit a high of 0.9814 and a low of 0.9650 against the CHF in the previous week. The pair is expected to find support at 0.9666, and a fall through could take it to the next support level of 0.9576. The pair is expected to find its first resistance at 0.9830, and a rise through could take it to the next resistance level of 0.9904. Going forward, investors will keep an eye on the Swiss National Bank’s interest rate decision along with ZEW survey expectations and producer and import prices for further cues in the Swiss Franc.
USDCAD
The USD rose against the CAD last week, closing 0.43% higher at 1.3049. The Bank of Canada maintained the benchmark interest rate at 0.5%, highlighting that underlying economic conditions do not warrant a change in policy at this time. Further, the central bank also raised concerns about the disappointing performance of the nation’s export sector during the second quarter. In economic news, Canada’s labor market painted a mix picture as economy added more-than-expected jobs in August, albeit the unemployment rate advanced in the same month as more number of people joined the Canadian workforce. Moreover, the Ivey PMI expanded at a slower than expected pace in August. Further, building permits rebounded less-than-expected on a monthly basis in July, while housing starts eased on an annual basis in August. Additionally, the new housing price index advanced higher than market expectations on a monthly basis in July. During the previous week, the pair traded at a high of 1.3053 and a low of 1.2823. Immediate downside, the first support level is seen at 1.2897, followed by 1.2745, while on the upside, the first resistance level situated in 1.3127, followed by 1.3205. Moving ahead, market participants would keep a tab on Canada’s manufacturing shipments for further direction.
AUDUSD
The AUD weakened against the USD last week, closing 0.42% lower at 0.7541. In a widely expected move, the Reserve Bank of Australia kept official cash rate steady at 1.5%. Further, the central bank’s official statement mentioned that the nation’s labor market indicators continue to be somewhat mixed, but suggested continued expansion in employment in the near term. On the data front, Australia’s gross domestic product advanced at a slower pace on a quarterly basis in the second quarter of 2016, while on annual basis the nation’s economy expanded at its fastest pace in four years last quarter. Meanwhile, the country’s trade deficit narrowed sharply in July. Additionally, the AiG performance of services index and performance of construction index both contracted in August. Moreover, current account deficit widened less than market expectations in the second quarter of 2016. During the previous week, the pair traded at a high of 0.7732 and a low of 0.7538. The pair is expected to find its first support at 0.7475 and first resistance at 0.7669. The second support is expected at 0.7410 and second resistance at 0.7798.
Moving ahead, market participants will keep a close watch on Australia’s unemployment rate, consumer inflation expectations, Westpac consumer confidence index along with NAB’s business confidence index scheduled for the week.
Gold
Gold traded 0.20% higher during the previous week, closing at USD1327.83 per ounce, as a sharp decline in global equity markets, increased demand for the safe haven yellow metal. The precious metal traded at a high of USD1357.60 per ounce and a low of USD1325.50 per ounce in the previous week. Immediate downside, the first support level is seen at USD1319.00 per ounce, followed by USD1306.20 per ounce, while on the upside, the first resistance level situated in USD1351.10 per ounce, followed by USD1370.40 per ounce.
Crude Oil
Crude oil strengthened in the previous week, closing 3.24% higher at USD45.88 per barrel, as investors anticipated the global glut of crude to finally decline following a drop in US stockpiles and increasing hopes that top oil producers will set a limit on production at its next meeting at the end of September. Moreover, the US Energy Department reported that crude oil inventories fell surprisingly by 14.5mn bls last week, the biggest drop in crude supplies since 1999 and the American Petroleum Institute (API) reported that crude oil inventories declined 12.1mn bls last week. Last week, the commodity traded at a high of USD47.75 per barrel and a low of USD43.84 per barrel. The commodity is expected to find its first support at USD43.78 per barrel and first resistance at USD47.69 per barrel. The second support is expected at USD41.86 per barrel and second resistance at USD49.68 per barrel.
Good trades Traders.
