The highlight of the week was the Federal Reserve (Fed) Chairwoman, Janet Yellen’s testimony and minutes of the European Central Bank’s (ECB) recent monetary policy meeting.
The greenback ended the week higher, after hawkish comments from the Fed Chair and upbeat economic data stepped up bets of an interest rate hike in December. The Fed Chief, Janet Yellen, in her testimony before the Joint Economic Committee, painted an upbeat picture of the US economy and stated that an increase in interest rate was probably warranted "relatively soon", but cautioned that there would only be gradual hikes in the interest rates over time. Further, she noted that holding off on a rate hike for too long could force the Fed to raise rates abruptly in the future to keep the economy from overheating.
In other economic news, data revealed that consumer prices in the US staged their biggest rise in six months in October, suggesting that inflation is beginning to gain traction. Moreover, the nation’s first-time applications for unemployment benefits tumbled to a 43-year low in the week ended 12 November, pointing towards robust growth in the nation’s jobs market. Further, the nation’s housing starts soared to a nine-year high in October and building permits surprisingly rose in the same month. Additionally, the nation’s retail sales showed a stronger than expected performance in October, thus renewing optimism over the strength of the nation’s consumer spending. Also, manufacturing (SIC) production increased less than estimated in October, while industrial production surprisingly remained flat in the same month, dragged down by a decline in utilities output. On the contrary, the nation’s mortgage applications slumped to the lowest since January in the week ended 11 November.
Separately, the St. Louis Fed President, James Bullard, indicated that a single policy rate increase, possibly in December, may be sufficient to move monetary policy to a neutral setting. He further stated that the US economy could receive a medium-term boost if the newly elected US President, Donald Trump, boosts infrastructure spending and tax reforms. Separately, the Boston Fed President, Eric Rosengren, expects a Fed rate hike in December, barring any unexpected developments. Further, he added that the Fed would likely hike interest rates more aggressively if the newly elected US President significantly stimulates the economy.
The Euro ended the week lower, after the ECB President, Mario Draghi, indicated that the ECB is likely to announce an extension of its €1.7 trillion bond-buying program next month and stated that the Eurozone’s economic recovery remains heavily reliant on the ECB’s stimulus measures. Meanwhile, minutes of the ECB’s recent meeting revealed that most policymakers are in favor of an extension in the asset purchase program, which is due to end in March and widely agreed that December would be a key month for deciding the future course of policy.
EURUSD
Last week, the EUR traded 2.44% lower against the USD and closed at 1.0585, after the ECB President, Mario Draghi, hinted that the ECB is ready to inject more stimulus in December. In economic news, the Eurozone’s seasonally adjusted flash gross domestic product (GDP) climbed 0.3% on a quarterly basis in 3Q 2016, meeting market expectations. Additionally, the region’s ZEW survey of economic sentiment index rose more than expected in November. Further, the region’s seasonally adjusted trade surplus widened more than expected in September. Meanwhile, the region’s consumer price inflation came in weaker than forecasted by 0.2% on a monthly basis in October while industrial production dropped less than estimated in September. Elsewhere, Germany’s GDP expanded less than forecasted by 0.2% on a quarterly basis in 3Q 2016. Meanwhile, the nation’s ZEW survey of economic sentiment index rose more than anticipated in November. During the previous week, the pair traded at a high of 1.0826 and a low of 1.0569. The pair is expected to find its first support at 1.0499 and first resistance at 1.0756. The second support is expected at 1.0406 and second resistance at 1.0920. Going ahead, this week investors would focus on the flash Markit manufacturing and services PMI data across the Eurozone, along with the region’s flash consumer confidence index. Additionally, traders will closely watch Germany’s final GDP growth and GfK consumer confidence.
GBPUSD
During the previous week, the GBP traded 2.03% lower against the USD and ended at 1.2343. Macroeconomic data indicated that, UK’s ILO unemployment rate unexpectedly dropped to 4.8% in the three months through September. Further, the nation’s annualized retail sales jumped more than expected in October, whereas annualized inflation climbed less than expected by 0.9% in the same month. Meanwhile, the Bank of England (BoE) Governor, Mark Carney, cautioned Britons that inflation in the UK is set to accelerate in the coming months, following a slump in the Pound. During the previous week, the pair traded at a high of 1.2581 and a low of 1.2302. The pair is expected to find support at 1.2244, and a fall through could take it to the next support level of 1.2134. The pair is expected to find its first resistance at 1.2523, and a rise through could take it to the next resistance level of 1.2692. Looking ahead, Britain’s flash GDP, public sector net borrowings, BBA mortgage approvals and Nationwide housing prices data, all slated to release this week, would be on investors’ radar.
USDJPY
Last week, the USD traded 3.97% higher against the JPY and closed at 110.91. On the economic front, Japan’s flash annualized GDP rose more than expected by 2.2% on a quarterly basis in 3Q 2016, suggesting the economy has regained some momentum. Additionally, the nation’s final industrial production climbed in September. Separately, the Bank of Japan (BoJ) Governor, Haruhiko Kuroda, reiterated that the Japanese economy is likely to expand moderately and is heading towards the central bank’s 2.0% inflation target but risks are tilted to the downside due to uncertainty over the global economy. The USD hit a high of 110.93 and a low of 106.85 against the JPY in the previous week. The pair is expected to find its first support at 108.14 and first resistance at 112.22. The second support is expected at 105.46 and second resistance at 113.62. This week, market participants look forward to the release of Japan’s national consumer price inflation, adjusted merchandise trade balance, Nikkei manufacturing PMI, all industry activity index and small business confidence index.
USDCHF
Last week, the USD traded 2.21% higher against the CHF and closed at 1.0093. In economic news, data showed that Switzerland’s ZEW economic expectations index surged to a five-month high level in November. The USD hit a high of 1.0123 and a low of 0.9895 against the CHF in the previous week. The pair is expected to find support at 0.9956, and a fall through could take it to the next support level of 0.9812. The pair is expected to find its first resistance at 1.0184, and a rise through could take it to the next resistance level of 1.0268. Moving ahead, Switzerland’s trade balance and industrial production data, slated to release this week, would pique investor attention.
USDCAD
During the previous week, the USD traded 0.3% lower against the CAD and ended at 1.3499. The Canadian Dollar gained ground, after Canada’s seasonally adjusted consumer price index climbed by 0.2% on a monthly basis in October, meeting market expectations. Moreover, the nation’s existing home sales rose in the same month. The pair traded at a high of 1.3589 and a low of 1.3400 during the previous week. Immediate downside, the first support level is seen at 1.3412, followed by 1.3312, while on the upside, the first resistance level situated in 1.3601, followed by 1.3690. Going forward, traders would focus on Canada’s retail sales data, the sole important release this week.
AUDUSD
The AUD weakened against the USD last week, closing 2.89% lower at 0.7332. Minutes of the Reserve Bank of Australia’s (RBA) November meeting reflected an upbeat tone of Australia’s inflation rate. However, the central bank noted that considerable uncertainty remained about the strength of labor market conditions, as employment growth has been concentrated in part-time jobs. Separately, the RBA Governor, Philip Lowe, maintained a generally optimistic tone about the nation’s economy. Further, he added that there were reasonable prospects that inflation would return to around the average levels over the next couple of years. Another set of economic data revealed that, Australia’s seasonally adjusted unemployment rate surprisingly remained steady at a three year low level of 5.6% in October. Further, Australia’s Westpac leading index climbed in the same month. During the previous week, the pair traded at a high of 0.7581 and a low of 0.7330. The pair is expected to witness its first support at 0.7251 and second support at 0.7165, while the first resistance is expected at 0.7502 and second resistance at 0.7667. Looking ahead, market participants would monitor Australia’s CB leading indicator data, the only release this week.
Gold
Gold traded 1.61% lower during the previous week, closing at USD1207.89 per ounce, amid gains in the greenback, following hawkish comments from the US Fed Chair, Janet Yellen that fueled expectations of a Fed interest rate hike in December. The precious metal traded at a high of USD1233.10 per ounce and a low of USD1201.30 per ounce in the previous week. The precious metal is expected to find its first support at USD1195.23 per ounce and first resistance at USD1227.03 per ounce. The second support is expected at USD1182.37 per ounce and second resistance at USD1245.97 per ounce.
Crude Oil
Crude oil traded 5.25% higher in the previous week, closing at USD45.69 per barrel, amid mounting expectations that the OPEC will find a way to curb production in a meeting scheduled later this month. Gains in crude prices were boosted further, after the Russian Energy Minister, Alexander Novak, stated that Russia will support OPEC’s deal to curb production and saw strong chances of oil producers’ reaching an agreement on the terms of output deal in an upcoming meeting. Additionally, the Saudi Arabia Energy Minister, Khalid al-Falih, expressed optimism over OPEC’s ability to reach an output deal later this month. Separately, the Energy Information Administration (EIA) reported that US crude stockpiles rose more than expected by 5.3 million barrels to 490.3 million barrels in the week ended 11 November, while the American Petroleum Institute (API) indicated that US crude oil inventories climbed by 3.7 million barrels to 488.8 million last week. Crude oil hit a high of USD46.58 per barrel and a low of USD42.20 per barrel in the previous week. The commodity is expected to find its first support at USD43.04 per barrel and first resistance at USD47.42 per barrel. The second support is expected at USD40.43 per barrel and second resistance at USD49.19 per barrel.
Good trades Traders.
