The highlight of the week was the minutes of the US Federal Reserve’s (Fed) latest monetary policy meeting and a speech by the Fed Chair, Janet Yellen. The minutes showed that it was a close decision to keep rates on hold but policymakers generally agreed that the case for an increase in interest rates had strengthened recently. Further, it indicated that committee members were largely divided on the timing of the next rate move as officials favoring a rate hike were concerned that waiting too long could threaten economic expansion and could lead to tighter labor market, while others found it appropriate to wait for “further evidence” of continued progress towards full employment and a faster pace of inflation before hiking rates. It also revealed that some officials judged an interest rate hike would be warranted “relatively soon” if the US economy continued to strengthen. Meanwhile, the policymakers also reduced the expected pace of interest rate hikes to one hike this year, two in 2017 and three each in 2018 and 2019. Separately, the US Fed Chair, Janet Yellen, noted that the US economic potential is slipping and may need aggressive steps to reconstruct it. Further, she stated that it may be wise to run a “high pressure” economy with a tight labor market to reverse some of the negative effects of the Great Recession.
In other economic news, the US advance retail sales rebounded sharply in September, in line with market expectations, thus increasing possibility of a Fed interest rate hike later this year. Also, the nation’s business inventories rose more than forecasted on a monthly basis in August. Further, the number of Americans filing for fresh unemployment benefits remained steady at a 43-year low level last week, pointing towards a steady labor market that could pave the way for a Fed interest rate hike in December. On the other hand, the nation’s preliminary Reuters/Michigan confidence index unexpectedly declined to a one-year low level in October, amid uncertainty regarding the US Presidential election.
The Euro ended the week lower. Data indicated that the Euro-zone’s ZEW economic sentiment improved more than expected in October, highlighting that investors remain increasingly optimistic about the region’s economic growth outlook. Additionally, the region’s Sentix investor confidence index advanced to a four-month high level in October, rising for the third straight month.
Macroeconomic data released during the week showed that Germany’s final consumer price index (CPI) accelerated to a 16-month high level on an annual basis in September. Moreover, the nation’s ZEW survey of economic sentiment index advanced in October, notching its highest level since June. Further, the nation’s seasonally adjusted trade surplus widened in August, as exports rebounded sharply on a monthly basis in August, rising by the most in more than six years.
EURUSD
During the previous week, the EUR traded 2.04% lower against the USD and ended at 1.0972. In economic news, the Euro-zone’s ZEW economic sentiment index advanced more than expected in October, while the Sentix investor confidence index improved more than expected in the same month. Additionally, the region’s seasonally adjusted industrial production rebounded on a monthly basis in August. Further, the seasonally adjusted trade surplus widened in the same month. Elsewhere, in Germany, final CPI climbed on a monthly basis in September, in line with market expectations. Also, the nation’s ZEW survey of economic sentiment index climbed in October and the current situation index rose in the same month. During the previous week, the pair traded at a high of 1.1200 and a low of 1.0971. The pair is expected to witness its first support at 1.0895 and second support at 1.0819, while the first resistance is expected at 1.1124 and second resistance at 1.1277. This week, investors would turn their attention to the ECB’s interest rate decision along with the region’s consumer price inflation and flash consumer confidence data to gauge strength in the European economy.
GBPUSD
Last week, the GBP traded 1.95% lower against the USD and closed at 1.2191, after UK’s industrial production unexpectedly fell on a monthly basis in August. Also, the nation’s total trade deficit widened more than expected in the same month. Moreover, construction output surprisingly fell on a monthly basis in the same month. Meanwhile, the nation’s manufacturing production rebounded less than expected on a monthly basis in August. Moreover, the NIESR estimated that UK’s gross domestic product (GDP) grew on a quarterly basis in the July-September 2016 period. Further, the nation’s Halifax house price index surprisingly advanced for the first time since June 2016 in September, while the RICS house price balance climbed for a second straight month in the same month. The pair traded at a high of 1.2444 and a low of 1.2090 during the previous week. The pair is expected to witness its first support at 1.2039 and second support at 1.1888, while the first resistance is expected at 1.2393 and second resistance at 1.2596. Looking ahead, investors’ would anxiously await Britain’s consumer price inflation, ILO unemployment rate, retail sales, Rightmove house price index and public sector net borrowing data, scheduled to release this week.
USDJPY
During the previous week, the USD traded 1.17% higher against the JPY and ended at 104.18. Data indicated that Japan’s Eco Watchers survey for current situation index unexpectedly dropped in September, highlighting that investors are getting pessimistic over the health of the nation’s economy. Additionally, the nation’s machinery orders declined for the first time in three months on a monthly basis in August, amid sluggish growth. Meanwhile, the nation’s trade surplus (BOP basis) narrowed less than expected in August, whereas the tertiary industry index unexpectedly remained flat on a monthly basis in the same month. On the other hand, the nation’s Eco Watchers survey for future outlook index advanced more than anticipated in September. Also, the preliminary machine tool orders eased on an annual basis in the same month. The pair traded at a high of 104.64 and a low of 102.81 during the previous week. The pair is expected to find support at 103.11, and a fall through could take it to the next support level of 102.05. The pair is expected to find its first resistance at 104.94, and a rise through could take it to the next resistance level of 105.71. Moving ahead, market participants would look forward to Japan’s industrial production and all industry activity index, due to release later this week.
USDCHF
Last week, the USD traded 1.31% higher against the CHF and closed at 0.9903. On the data front, Switzerland’s seasonally adjusted unemployment rate unexpectedly remained steady at 3.3% in September. Meanwhile, the nation’s ZEW survey of economic expectations index advanced for the second straight month in October. The pair traded at a high of 0.9910 and a low of 0.9772 during the previous week. The pair is expected to find its first support at 0.9813 and first resistance at 0.9951. The second support is expected at 0.9724 and second resistance at 1.0000. Moving ahead, investors would closely monitor Switzerland’s trade balance figures, the sole important data release this week.
USDCAD
During the previous week, the USD traded 1.18% lower against the CAD and ended at 1.3139. Macroeconomic data indicated that, Canada’s seasonally adjusted housing starts advanced on an annual basis in September. Further, the nation’s new housing price index rose for the 17th consecutive month on a monthly basis in August. The USD hit a high of 1.3307 and a low of 1.3103 against the CAD in the previous week. Immediate downside, the first support level is seen at 1.3059, followed by 1.2979, while on the upside, the first resistance level situated in 1.3263, followed by 1.3387. Going forward, BoC’s interest rate decision accompanied with Canada’s consumer price inflation and retail sales data, would pique significant amount of investor attention.
AUDUSD
The AUD strengthened against the USD last week, closing 0.47% higher at 0.7618. On the data front, Australia’s Westpac consumer confidence index climbed for the third consecutive month in October, indicating that consumers are getting more optimistic about the nation’s economic growth. Also, the nation’s consumer inflation expectations increased in October. Meanwhile the NAB business confidence index remained steady in September. Separately, the Reserve Bank of Australia (RBA), in its biannual financial stability review, highlighted that financial risks in the household sector have lessened since its last review six months ago but also warned that threats of oversupply in the apartment construction market has increased significantly in some regions. Further, it stated that Chinese financial crisis would negatively affect Australia through falling trade volumes and commodity prices but also noted that Australia’s banking system is strong enough to withstand these domestic and global challenges. During the previous week, the pair traded at a high of 0.7648 and a low of 0.7507. Immediate downside, the first support level is seen at 0.7534, followed by 0.7450, while on the upside, the first resistance level situated in 0.7675, followed by 0.7732. Looking ahead, this week market participants await the release of RBA’s meeting minutes coupled with Governor, Philip Lowe speech. Moreover, Australia’s unemployment rate, NAB business confidence and employment change, would keep investors’ on their toes.
Gold
During the previous week, gold traded 0.48% lower and ended at USD1251.03 per ounce, as upbeat economic data in the US led to a broad strength in the greenback, denting the demand for the precious yellow metal. The yellow metal witnessed a high of USD1266.80 per ounce and a low of USD1246.90 per ounce in the previous week. Gold is expected to its find support at USD1243.47 per ounce, and a fall through could take it to the next support level of USD1235.23 per ounce. The yellow metal is expected to find its first resistance at USD1263.37 per ounce, and a rise through could take it to the next resistance level of USD1275.03 per ounce.
Crude Oil
Crude oil strengthened in the previous week, closing 1.08% higher at USD50.35 per barrel, after Russia, one of the world’s largest oil producers, indicated that it was ready to join the Organization of the Petroleum Exporting Countries (OPEC), in measures to limit global oil production. Separately, the International Energy Agency (IEA) revealed that OPEC boosted its output to a record 33.64 million barrels a day in September, while OPEC reported that its production rose to the highest level in at least eight years in the same month. Meanwhile, the Energy Information Administration (EIA) disclosed that US crude oil stocks rose by 4.9 million barrels to 504.6 million barrels in the week ended 07 October, while the American Petroleum Institute (API) indicated that US crude oil inventories advanced by 2.7 million barrels to 501.5 million barrels last week. Crude oil hit a high of USD51.60 per barrel and a low of USD49.20 per barrel in the previous week. Crude oil is expected to its find support at USD49.15 per barrel, and a fall through could take it to the next support level of USD47.97 per barrel. The yellow metal is expected to find its first resistance at USD51.55 per barrel, and a rise through could take it to the next resistance level of USD52.77 per barrel.
Good trades Traders.
