Last week, the forex market was dictated by the UK Supreme Court’s Brexit ruling and robust economic data from Eurozone and Britain.
The Pound ended the week higher against the USD, after UK’s Supreme Court dealt a devastating blow to Britain Prime Minister, Theresa May by ruling that the British government cannot trigger Brexit process by itself and must gain the consent of Parliament before it begins the process. In other economic news, initial estimate of GDP showed that UK economy grew better than expected on a quarterly basis in the fourth-quarter of 2016, propelled by robust consumer spending, thus suggesting that the feared economic slowdown following the Brexit vote has not materialized yet.
The US Dollar ended the week mixed. In economic news, flash estimate of annualized gross domestic product (GDP) showed that the US economy decelerated in the final quarter of 2016, pressured by a wider trade deficit. Additionally, the nation’s preliminary durable goods orders unexpectedly dropped in December, dragged by a steep drop in demand for defense-related goods. Moreover, the nation’s initial jobless claims remained at low level, albeit increasing to a four-week high level in the week ended 21 January 2017. Further, the nation’s new home sales plummeted to a 10-month low level in December, while existing home sales dropped higher than estimated in the same month.
Another set of economic data revealed that the US manufacturing and services sector showed strong performance in January, with the manufacturing PMI notching its highest level since March 2015 in January, whereas the services sector activity expanding at its quickest pace in 14-months in the same month. Also, the nation’s final Reuters/Michigan consumer sentiment index surprisingly surged to a 13-year high level in January, as consumers remained more optimistic about the nation’s economy and job growth. Moreover, the nation’s CB leading indicator surpassed market expectations in December. Further, the nation’s MBA mortgage applications surged to its highest level in more than seven-months in the week ended 20 January 2017. Meanwhile, the nation’s goods trade deficit narrowed less than expected in December, amid a pickup in exports.
The Euro ended the week higher, after the Eurozone’s manufacturing sector surprised with an upside, expanding to a nearly 6-year high level in January, thus suggesting that manufacturing activity will act as a driving force in the region’s economic growth. Meanwhile, the region’s services sector unexpectedly slowed to a 3-month low level in January.
Elsewhere, in Germany, activity in services sector unexpectedly weakened to a 4-month low in January, whereas growth in manufacturing sector accelerated to a 3-year high level in the same month, boosting optimism over the health of the nation’s manufacturing sector.
EURUSD
During the previous week, the EUR traded marginally lower against the USD and ended at 1.0694. In economic news, the Eurozone’s flash Markit services PMI unexpectedly eased in January, while the manufacturing PMI unexpectedly expanded in the same month. Also, the region’s preliminary consumer confidence index improved in January. Elsewhere in Germany, the flash Markit services PMI unexpectedly dropped in January. Also, the nation’s Ifo business expectations and business climate indices, both surprisingly eased in January. On the contrary, activity in the nation’s manufacturing sector strengthened in January, whereas the GfK consumer confidence index rose in February. Also, the nation’s Ifo current assessment index climbed in line with market expectations in January. The EUR hit a high of 1.0775 and a low of 1.0658 against the USD in the previous week. Immediate downside, the first support level is seen at 1.0644, followed by 1.0592, while on the upside, the first resistance level situated in 1.0761, followed by 1.0826. Moving ahead, market participants look forward to the consumer price inflation, unemployment rate, final Markit manufacturing and services PMIs and retail sales data across the Eurozone, scheduled to release this week. Additionally, the Eurozone’s flash 4Q GDP data will also garner a lot of market attention.
GBPUSD
The GBP advanced against the USD last week, closing 1.39% higher at 1.2546, after the UK’s Supreme Court ruled that the British government cannot initiate the Brexit proceedings without the consent of Parliament. Gains in the Pound were boosted further, after data indicated that UK’s preliminary GDP rose more than expected on a quarterly basis in 4Q 2016. Additionally, the nation’s BBA mortgage approvals unexpectedly climbed in December, while the nation’s public sector net borrowing posted a deficit in the same month. The GBP hit a high of 1.2673 and a low of 1.2382 against the USD in the previous week. The pair is expected to find support at 1.2399, and a fall through could take it to the next support level of 1.2245. The pair is expected to find its first resistance at 1.2690, and a rise through could take it to the next resistance level of 1.2827. Going ahead, investors will focus on BoE’s interest rate decision along with UK’s Markit manufacturing and construction PMIs, consumer confidence, consumer credit and mortgage approvals data, all set to release this week.
USDJPY
The USD traded 0.4% higher against the JPY last week, with the pair closing at 115.06. On the economic front, data showed that Japan’s national consumer price index (CPI) advanced more than anticipated on an annual basis in December. Also, the nation’s flash Nikkei manufacturing PMI rose in January and the all industry activity index climbed less than estimated in November. Further, the nation’s final leading economic and coincident indices, both advanced in November. Meanwhile the nation’s adjusted merchandise trade surplus narrowed in December, as exports jumped and imports eased. During the previous week, the pair traded at a high of 115.38 and a low of 112.53. The pair is expected to find its first support at 113.32 and first resistance at 116.17. The second support is expected at 111.50 and second resistance at 117.20. This week, traders will closely monitor BoJ’s monetary policy meeting. Also, Japan’s unemployment rate, industrial production, final Nikkei manufacturing PMI, retail trade, large retailers’ sales and consumer confidence data, will also pique investor attention.
USDCHF
The USD fell against the CHF last week, closing 0.22% lower at 0.9990. Macroeconomic data revealed that Switzerland’s ZEW survey of economic expectations index advanced in January. Also, the nation’s UBS consumption indicator rose in December. The pair traded at a high of 1.0028 and a low of 0.9960 during the previous week. Immediate downside, the first support level is seen at 0.9959, followed by 0.9925, while on the upside, the first resistance level situated in 1.0027, followed by 1.0061. Looking ahead, investors would await Switzerland’s real retail sales, KOF leading indicator and SVME-purchasing managers’ index, all scheduled to release this week.
USDCAD
The USD traded 1.28% lower against the CAD last week, with the pair closing at 1.3150. In economic news, Canada’s CFIB business barometer index declined in January. The pair traded at a high of 1.3335 and a low of 1.3054 during the previous week. The pair is expected to witness its first support at 1.3016 and second support at 1.2894, while the first resistance is expected at 1.3297 and second resistance at 1.3456. Going ahead, Canada’s GDP and RBC manufacturing PMI, due to release this week, will be on investors’ radar.
AUDUSD
The AUD traded 0.09% lower against the USD last week, with the pair closing at 0.7546, after Australia’s CPI grew weaker than forecasted on a quarterly basis in 4Q 2016. Meanwhile, the nation’s Westpac leading index advanced in December. During the previous week, the pair traded at a high of 0.7609 and a low of 0.7512. The pair is expected to witness its first support at 0.7504 and second support at 0.7460, while the first resistance is expected at 0.7601 and second resistance at 0.7654. This week, market participants will concentrate on Australia’s AiG performance of manufacturing and services indices, trade balance, NAB business confidence and building permits data.
Gold
Last week, gold fell 1.58% to close at USD1191.20 per ounce, as major stock market indices in the US rallied to an all time high last week, denting demand for the precious yellow metal as an alternative investment. The precious metal traded at a high of USD1223.00 per ounce and a low of USD1182.60 per ounce in the previous week. The precious metal is expected to find its first support at USD1176.13 per ounce and first resistance at USD1216.53 per ounce. The second support is expected at USD1159.17 per ounce and second resistance at USD1239.97 per ounce.
Crude Oil
Crude oil traded 0.09% lower in the previous week, closing at USD53.17 per barrel, amid signs of a strong recovery in US oil-drilling that reignited supply-glut concerns. Moreover, the Energy Information Administration (EIA) showed that US crude stockpiles rose by 2.8 million barrels to 488.3 million barrels in the week ended 20 January, while the American Petroleum Institute (API) indicated that US oil inventories advanced by 2.9 million barrels last week. The commodity traded at a high of USD54.08 per barrel and a low of USD52.21 per barrel in the previous week. The commodity is expected to find its first support at USD52.23 per barrel and first resistance at USD54.10 per barrel. The second support is expected at USD51.28 per barrel and second resistance at USD55.02 per barrel.
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