Last week, the forex market was dictated by comments from the Britain’s Prime Minister, Theresa May and minutes of the European Central Bank’s (ECB) recent monetary policy meeting.
The Pound ended the week on a weaker footing against the USD, amid fears of a “hard Brexit”, after news emerged that Britain’s Prime Minister, Theresa May will signal plans to exit the European Union’s single market to regain control over UK’s borders. Meanwhile, the Bank of England (BoE) Governor, Mark Carney, in a speech to the Treasury Select Committee, stated that Brexit is no longer the biggest domestic risk to Britain’s economy, reversing his previous warnings about Brexit being the most significant short-term risk to the UK’s financial stability.
The Euro ended the week higher against the USD, after minutes of the ECB’s recent meeting revealed that policymakers expect inflation in the common currency region to rise significantly in coming months. Further, minutes showed that policymakers were split on whether or not to extend the length of asset purchase program, as few council members preferred extending the lower rate of bond-purchases for six months, while some argued for a longer extension, taking the program into next year. However, few members refused both proposals to prolong the program after March, while welcoming the scaling down of purchases.
On the data front, the Eurozone’s unemployment rate remained unchanged at a seven-year low level in November, meeting market expectations, thus suggesting that the region’s economy remained on a gradual growth-path. Moreover, the region’s Sentix investor confidence index surged in January, pushing the index to its highest level since August 2015, amid increased optimism over the region’s economic outlook.
The US Dollar ended the week lower against its key counterparts, after the US President-elect Donald Trump failed to offer details on his promises to boost fiscal spending and cut taxes at a highly-anticipated news conference. Meanwhile, the Philadelphia Fed President, Patrick Harker expressed confidence in the US economic fundamentals, stating that the economy is gathering considerable strength to warrant three interest rate hikes this year.
In other economic news, consumer confidence in the US unexpectedly showed a modest drop in January, after notching a 12-year high in the previous month. Meanwhile, the nation’s advance retail sales came in weaker than expected in December. On the other hand, the nation’s business inventories surged to its highest level since June 2015 in November, while first-time claims for unemployment benefits rose less than anticipated in the week ended 06 January 2017, suggesting continuous strength in the labor market that is starting to spur faster wage growth in the nation. Moreover, the nation’s NFIB small business optimism index notched its 12-year high level in December, as businesses turned increasingly optimistic about the nation’s growth prospects following the US Presidential election.
EURUSD
Last week, the EUR traded 1.05% higher against the USD and closed at 1.0641, after better than expected economic data across the Eurozone boosted investor sentiment. Data indicated that Eurozone’s unemployment rate remained unchanged at 9.8% in November, meeting market expectations. Moreover, the region’s Sentix investor confidence index surged in January, while the seasonally adjusted industrial production climbed in November. Elsewhere, Germany’s seasonally adjusted trade surplus widened more than anticipated in November. Additionally, the nation’s seasonally adjusted exports and imports, both came in better than expected in November. Further, the nation’s seasonally adjusted industrial production advanced less than expected in November. The pair traded at a high of 1.0685 and a low of 1.0454 during the previous week. Immediate downside, the first support level is seen at 1.0499, followed by 1.0361, while on the upside, the first resistance level situated in 1.0730, followed by 1.0823. This week, all eyes would be on the ECB’s interest rate decision along with the ZEW survey of economic sentiment index and consumer price inflation data across the Eurozone.
GBPUSD
During the previous week, the GBP traded 0.85% lower against the USD and ended at 1.2176, after the British Prime Minister stated that the UK would not hold on keeping “bits of European Union membership”, raising fresh worries of a “hard Brexit”. On the data front, UK’s industrial production rebounded more than anticipated in November, whereas manufacturing production advanced in the same month. Further, the NIESR estimated that UK’s economy grew 0.5% during the three months to December, at par with market expectations. Also, the nation’s Halifax house price index rose more than expected in December and the BRC retail sales across all sectors climbed in the same month. On the other hand, the nation’s total trade deficit widened more than expected in November, as record high imports outweighed exports. Also, the nation’s construction output unexpectedly fell in November. The GBP hit a high of 1.2317 and a low of 1.2039 against the USD in the previous week. The pair is expected to witness its first support at 1.2046 and second support at 1.1903, while the first resistance is expected at 1.2324 and second resistance at 1.2459. Going ahead, investors will look forward to a crucial Brexit speech by the Britain’s Prime Minister, Theresa May along with the BoE Governor, Mark Carney’s speech, scheduled this week. Moreover, Britain’s consumer price inflation, ILO unemployment rate, Rightmove house prices, RICS house price balance and retail sales data, all due to release this week, would be on investors’ radar.
USDJPY
During the previous week, the USD traded 2.05% lower against the JPY and ended at 114.51. The Japanese Yen gained ground, after data showed that Japan’s consumer confidence index surged in December. Further, the nation’s preliminary leading economic and coincident indices, both advanced more than expected in November. Meanwhile, the nation’s trade surplus (BOP basis) narrowed less than expected in November. On the contrary, the nation’s adjusted (total) current account surplus narrowed more than estimated in November. In other economic news, the nation’s Eco-Watchers survey for the current situation remained steady in December, while the Eco-Watchers survey for the future outlook fell in the same month. During the previous week, the pair traded at a high of 116.87 and a low of 113.76. Immediate downside, the first support level is seen at 113.27, followed by 111.96, while on the upside, the first resistance level situated in 116.38, followed by 118.18. This week, market participants would focus on Japan’s machinery orders, tertiary industry index, machine tool orders and industrial production data.
USDCHF
Last week, the USD traded 0.94% lower against the CHF and closed at 1.0083. On the data front, Switzerland’s seasonally adjusted unemployment rate remained unchanged at 3.3% in December, meeting market expectations. Additionally, the nation’s real retail sales rebounded on an annual basis in November. The pair traded at a high of 1.0248 and a low of 1.0045 during the previous week. The pair is expected to find support at 1.0009, and a fall through could take it to the next support level of 0.9925. The pair is expected to find its first resistance at 1.0212, and a rise through could take it to the next resistance level of 1.0331. Looking ahead, investors will closely monitor Switzerland’s producer and import prices data, the sole economic release this week.
USDCAD
Last week, the USD traded 0.94% lower against the CAD and closed at 1.3111. Macroeconomic data revealed that Canada’s seasonally adjusted housing starts rose more than anticipated in December. Moreover, the nation’s new housing price index advanced less than forecasted in November, whereas the Teranet/National Bank house price index rose in December. On the other hand, the nation’s building permits slid in November. The USD hit a high of 1.3294 and a low of 1.3030 against the CAD in the previous week. Immediate downside, the first support level is seen at 1.3008, followed by 1.2887, while on the upside, the first resistance level situated in 1.3272, followed by 1.3415. This week, Bank of Canada’s (BoC) interest rate decision accompanied with Canada’s consumer price inflation, retail sales and existing home sales figures, will garner significant amount of market attention.
AUDUSD
The AUD traded 2.85% higher against the USD last week, with the pair closing at 0.7499. On the data front, Australia’s seasonally adjusted retail sales rose less than expected in November. Further, the nation’s building approvals rebounded more than estimated in November. Meanwhile, the AiG performance of construction index climbed in December, but remained in the contraction territory. The AUD hit a high of 0.7519 and a low of 0.7331 against the USD in the previous week. The pair is expected to witness its first support at 0.7381 and second support at 0.7262, while the first resistance is expected at 0.7569 and second resistance at 0.7638. Looking ahead, traders will keep a close watch on Australia’s labor report, Westpac consumer confidence, consumer inflation expectations and HIA new home sales data, all due to release this week.
Gold
Gold traded 2.11% higher during the previous week, closing at USD1197.34 per ounce, as the greenback weakened after Donald Trump provided little hints on future fiscal policies in his first press conference as the US President-elect. The precious metal traded at a high of USD1207.20 per ounce and a low of USD1177.00 per ounce in the previous week. The precious metal is expected to find its first support at USD1181.07 per ounce and first resistance at USD1211.27 per ounce. The second support is expected at USD1163.93 per ounce and second resistance at USD1224.33 per ounce.
Crude Oil
Crude oil weakened in the previous week, closing 3.0% lower at USD52.37 per barrel, as dismal Chinese exports data added to rising concerns about OPEC’s willingness to complete with its planned production cut. Separately, Iraqi Oil Minister, Jabar Ali al-Luaibi, confirmed that Iraq has trimmed its oil production by 160,000 barrels a day since the start of January. Also, the Saudi’s Energy Minister, Khalid Al‐Falih stated that Saudi Arabia has reduced its oil production to less than 10 million barrels a day, below its targeted level. Oil prices failed to find support, after the Energy Information Administration (EIA) showed that US crude stockpiles rose 4.1 million barrels to 483.1 million barrels in the week ended 06 January 2017, while the American Petroleum Institute (API) indicated that US crude oil inventories advanced 1.5 million barrels last week. The commodity traded at a high of USD53.50 per barrel and a low of USD50.71 per barrel in the previous week. The commodity is expected to find its first support at USD50.99 per barrel and first resistance at USD53.78 per barrel. The second support is expected at USD49.46 per barrel and second resistance at USD55.04 per barrel.
Good trades Traders.
