Last week, the forex market was dictated by the European Central Bank’s (ECB) interest rate decision.
The Euro ended the week lower, after comments from the ECB President, Mario Draghi, doused speculation about winding down the central bank’s current asset purchase program by stating that policymakers had not even discussed about tapering it at the meeting. Instead, he reaffirmed that quantitative easing would continue until March 2017 or beyond, if needed. The ECB kept the benchmark interest rate steady at 0.00%, but left the door open for additional stimulus in December.
In other economic news, the Eurozone’s consumer price index (CPI) jumped to its highest level in two years on a monthly basis in September, suggesting that massive measures taken by the ECB to shore up economy are showing effects.
The US Dollar ended the week on a stronger footing, after data indicated that consumer price inflation (CPI) in the US rose at the fastest pace in five months on a monthly basis in September, intensifying hopes for a potential Fed rate hike in December. Additionally, the annual CPI accelerated to the highest level since October 2014 in September. Also, the nation’s existing home sales zoomed to its highest level since June in the same month, reinforcing optimism over the health of the nation’s housing market. Moreover, industrial production rebounded in September, while the manufacturing production advanced in the same month. In other economic news, the nation’s Philadelphia Fed manufacturing index rose more than expected in October. Further, the nation’s building permits rose in September, whereas housing starts showed a poor performance, after it unexpectedly dropped for the second straight month in September. Moreover, the number of Americans filing for fresh unemployment benefits climbed the most since July in the last week.
Separately, the Federal Reserve’s latest Beige Book, suggested that most districts in the US indicated a moderate pace of expansion, from late August to early October, amid tight labor markets and steady wage gains. Further, it indicated that outlook was mostly positive, with growth expected to continue at a slight to moderate pace in several districts. It also stated that economic uncertainty surrounding the upcoming Presidential election is weighing on some business sectors in the country.
Separately, the Federal Reserve (Fed) Vice Chairman, Stanley Fischer, warned that the US economy may face longer and deeper recession in the future if interest rates remain stuck at current low levels. Further he noted that the Fed is “very close” to its full employment and inflation target. Meanwhile, the US San Francisco Fed President, John Williams, continued to endorse another rate hike in 2016.
EURUSD
During the previous week, the EUR traded 0.82% lower against the USD and ended at 1.0882, after the ECB refrained from tapering its current asset purchase program at its latest monetary policy meeting. The ECB, in a widely expected move, maintained the benchmark interest rate unchanged at 0.00% and asset purchase program intact at €80.00 billion. In other economic news, the Euro-zone’s consumer price index (CPI) accelerated 0.4% on a monthly basis in September, in line with market expectations. Additionally, the region’s seasonally adjusted current account surplus expanded in August. Meanwhile, the flash consumer confidence index improved in October, at par with market expectations. On the other hand, the region’s seasonally adjusted construction output slid on a monthly basis in August. The pair traded at a high of 1.1039 and a low of 1.0859 during the previous week. Immediate downside, the first support level is seen at 1.0816, followed by 1.0747, while on the upside, the first resistance level situated in 1.0996, followed by 1.1107. Looking ahead, this week investors would anxiously await the flash Markit manufacturing and services PMI data across the Eurozone, to gauge strength in the European economy. Additionally, Germany’s unemployment rate, preliminary consumer price index, Ifo expectations index and GfK consumer confidence survey data would also be keenly watched by investors.
GBPUSD
During the previous week, the GBP traded 0.34% higher against the USD and ended at 1.2233, after UK’s annual inflation jumped by 1.0% in September, advancing at the fastest pace in nearly two years. Additionally, on a monthly basis, the CPI rose more than expected in the same month. In other economic news, the nation’s ILO unemployment rate remained unchanged at an eleven-year low level of 4.9% during the three months ended August, in line with market expectations, suggesting that the historic Brexit vote had little impact so far on the nation’s labor market. Meanwhile, the nation’s retail sales came in flat on a monthly basis in September. Moreover, public sector net borrowing posted a higher than expected deficit in the same month. The pair traded at a high of 1.2332 and a low of 1.2136 during the previous week. Immediate downside, the first support level is seen at 1.2136, followed by 1.2038, while on the upside, the first resistance level situated in 1.2332, followed by 1.2430. This week, investors would focus on UK’s flash GDP, GfK consumer confidence and mortgage approvals data, to get better insights into UK’s economy.
USDJPY
The USD traded 0.36% lower against the JPY last week, with the pair closing at 103.80. The Japanese Yen gained ground, after the Bank of Japan (BoJ) Governor, Haruhiko Kuroda, signaled that the central bank might delay the timing for hitting its inflation target, citing underlying weakness in price growth, but vowed for more easing, if needed to spur economic recovery. Another set of data indicated that Japan’s final industrial production advanced on a monthly basis in August. Moreover, the nation’s all industry activity index climbed on a monthly basis in the same month. On the contrary, final machine tool orders slid on an annual basis in September. During the previous week, the pair traded at a high of 104.37 and a low of 103.17. Immediate downside, the first support level is seen at 103.19, followed by 102.58, while on the upside, the first resistance level situated in 104.39, followed by 104.98. Moving ahead, market participants would turn their attention to Japan’s national consumer price inflation, unemployment rate and preliminary Nikkei manufacturing PMI data, all slated to release this week.
USDCHF
Last week, the USD traded 0.31% higher against the CHF and closed at 0.9934. On the economic front, Switzerland’s trade surplus rose in September, notching its highest level since at least 1987, suggesting that the nation has weathered a currency market shock that sent the Swiss Franc soaring. Additionally, the nation’s exports rose on a monthly basis in September, whereas imports eased on a monthly basis in the same month. The pair traded at a high of 0.9962 and a low of 0.9843 during the previous week. The pair is expected to find its first support at 0.9866 and first resistance at 0.9985. The second support is expected at 0.9795 and second resistance at 1.0033. Moving ahead, market participants will look forward to Switzerland’s UBS consumption indicator and KOF leading indicator data, both scheduled to be released this week.
USDCAD
The USD rose against the CAD last week, closing 1.46% higher at 1.3331. The Canadian Dollar lost ground, after the Bank of Canada (BoC) Governor, Stephen Poloz, hinted that an interest rate cut may be on the table. Separately, the BoC, in its recent monetary policy meeting, kept the key interest rate unchanged at 0.5%. However, the central bank reduced its economic growth outlook, amid reduced expectations for exports and slowdown in housing. The central bank now expects Canada’s real GDP to expand by 1.1% this year and 2.0% in 2017, down from its July projection of 1.3% and 2.2% respectively. In other economic news, Canada’s retail sales unexpectedly dropped on a monthly basis in August, declining for a third straight month. Meanwhile, the nation’s CPI rose less than expected by 0.1% MoM in September. During the previous week, the pair traded at a high of 1.3355 and a low of 1.3006. Immediate downside, the first support level is seen at 1.3107, followed by 1.2882, while on the upside, the first resistance level situated in 1.3456, followed by 1.3580. Going forward, Canada’s wholesale sales and CFIB business barometer index, both slated to release this week, would garner market attention.
AUDUSD
During the previous week, the AUD traded 0.21% lower against the USD and ended at 0.7602.
Minutes of the Reserve Bank of Australia’s latest monetary policy meeting highlighted that updated forecasts on jobs and third quarter inflation figures will help to assess the nation’s economic outlook and would pave the way for any policy decisions in the next board review. Further, it revealed that although the Australian economy had continued its transition following the end of the mining investment boom, there exists a high degree of uncertainty in the domestic labor and housing markets. Another set of economic data indicated that, Australia’s seasonally adjusted unemployment rate surprisingly dropped to 5.6% in September, declining to a three-year low level. Also, the nation’s NAB business confidence index climbed in the third quarter of 2016. The AUD hit a high of 0.7734 and a low of 0.7581 against the USD in the previous week. Immediate downside, the first support level is seen at 0.7548, followed by 0.7488, while on the upside, the first resistance level situated in 0.7701, followed by 0.7794. Going ahead, market participants would closely monitor Australia’s consumer price inflation and HIA new home sales data, both slated to release this week.
Gold
Gold rose last week, closing 1.23% higher at USD1266.46 per ounce, as uncertainty surrounding the outcome of the US Presidential election increased demand for the safe-haven yellow metal as an alternative investment. Last week, the precious metal traded at a high of USD1275.90 per ounce and a low of USD1251.20 per ounce. The yellow metal is expected to witness its first support at USD1253.30 per ounce and second support at USD1239.90 per ounce, while the first resistance is expected at USD1278.00 per ounce and second resistance at USD1289.30 per ounce.
Crude Oil
Crude oil strengthened in the previous week, closing 0.99% higher at USD50.85 per barrel, after optimistic statements from the Secretary General of the OPEC, Mohammed Barkindo and Russian Energy Minister, Alexander Novak, on planned output cut, boosted investor sentiment. Oil prices were supported further, after the Energy Information Administration (EIA) showed that US crude oil stockpiles surprisingly fell by 5.2 million barrels to 499.4 million barrels in the week ended 14 October, while the American Petroleum Institute (API) indicated that US oil inventories unexpectedly narrowed by 3.8 million barrels to 497.7 million barrels last week. The black metal hit a high of USD52.22 per barrel and a low of USD49.90 per barrel in the previous week. Crude oil is expected to witness its first support at USD49.86 per barrel and second support at USD48.72 per barrel, while the first resistance is expected at USD52.18 per barrel and second resistance at USD53.36 per barrel.
Good trades Traders.
