Last week, the forex market was dictated by robust consumer prices data across the Eurozone, along with upbeat US economic data and minutes of the Federal Reserve’s (Fed) December meeting.
The Euro ended the week higher, after the flash consumer price inflation (CPI) in the common currency region spiked at the fastest annual growth-rate since September 2013 in December, thus easing some pressure on the European Central Bank (ECB) which has used a range of stimulus programs to get inflation back toward the central bank’s target of just below 2.0%. Additionally, the region’s final reading of Markit services PMI surprised with an upside in December, while activity in manufacturing sector was confirmed at its highest level in more than five years in December, thus suggesting that the region’s economic activity ended the year on a stronger footing.
The US dollar ended mixed last week. In economic news, the US non-farm payrolls came in weaker than forecasted in December, thus pointing to a slowdown in hiring. Additionally, the nation’s unemployment rate inched higher in December, meeting market consensus. Nevertheless, average hourly earnings of all employees posted its biggest annual rise since 2009 in December. Meanwhile, final durable goods orders improved slightly in November, while factory orders declined for the first time in five months in the same month. Also, the nation’s trade deficit widened to its highest level in nine-months in November.
Another set of economic data showed that the nation’s ISM manufacturing activity index showed expansion in December, growing at its fastest pace in two years, while the ISM non-manufacturing PMI unexpectedly retained its highest level since October 2015 in the same month. Additionally, the nation’s construction spending zoomed to a more than ten-year high level in November. Moreover, initial jobless claims dropped to a nearly 43-year low level in the week ended 31 December 2016, whereas ADP private sector added fewer than expected jobs in December.
Separately, latest FOMC minutes indicated that policymakers were grappled with “considerable uncertainty” about the possible impact of President-elect Donald Trump’s fiscal stimulus plans on the US economy and saw the possibility of faster interest rate hikes if the economic growth accelerates. Meanwhile, the Chicago Fed President, Charles Evans stated he has two interest rate hikes penciled in for 2017, but added that a forecast of three hikes is “not implausible”. Meanwhile, the Dallas Fed President, Robert Kaplan supported a gradual and patient path for interest rate hikes in 2017, arguing that it was too early to know whether Trump’s administration policies would boost economic growth. Further, he indicated that he was not ready to “pre-judge” changes in tax and spending policies in the incoming administration.
EURUSD
The EUR traded 0.16% higher against the USD last week, with the pair closing at 1.0530, after the Eurozone’s flash CPI surged on an annual basis in December. Moreover, the region’s final Markit manufacturing PMI rose in line with preliminary print in December, while the final Markit services PMI was surprisingly revised up in the same month. On the contrary, the region’s retail sales fell in November. Elsewhere, Germany’s flash CPI grew sharply in December, while unemployment rate remained unchanged in the same month. Further, growth in the manufacturing sector surprisingly quickened in December, whereas services sector activity was unexpectedly revised higher in the same month. Also, the nation’s construction sector showed a strong performance in December, whereas retail sales dropped more than expected in November. During the previous week, the pair traded at a high of 1.0620 and a low of 1.0341. The pair is expected to find support at 1.0377, and a fall through could take it to the next support level of 1.0219. The pair is expected to find its first resistance at 1.0656, and a rise through could take it to the next resistance level of 1.0777. This week, all eyes would be on the release of the ECB’s recent meeting minutes along with the region’s unemployment rate, industrial production and Sentix investor confidence data. Additionally, Germany’s industrial production as well as trade balance data would also grab investor attention.
GBPUSD
During the previous week, the GBP traded 0.45% lower against the USD and ended at 1.2280. In economic news, data showed that UK’s Markit manufacturing PMI unexpectedly rose in December, while the Markit construction PMI surprisingly climbed in the same month. Also, the nation’s Markit services PMI unexpectedly expanded in December and net consumer credit surprisingly advanced in November. Meanwhile, mortgage approvals for house purchases rose less than anticipated in November. The GBP hit a high of 1.2432 and a low of 1.2200 against the USD in the previous week. The pair is expected to find support at 1.2178, and a fall through could take it to the next support level of 1.2073. The pair is expected to find its first resistance at 1.2410, and a rise through could take it to the next resistance level of 1.2537. Looking ahead, traders anxiously await Britain’s total trade balance, NIESR GDP estimate, industrial and manufacturing production data, all scheduled to release this week.
USDJPY
Last week, the USD traded marginally higher against the JPY and closed at 116.91. On the data front, Japan’s final Nikkei manufacturing PMI rose in December, whereas the nation’s Nikkei services PMI climbed in December. During the previous week, the pair traded at a high of 118.60 and a low of 115.07. The pair is expected to witness its first support at 115.19 and second support at 113.36, while the first resistance is expected at 118.72 and second resistance at 120.42. Going ahead, investors will look forward to Japan’s consumer confidence, leading and coincident indices coupled with Eco-Watchers survey and BOP basis trade balance data, all due to release this week.
USDCHF
Last week, the USD traded a tad higher against the CHF and closed at 1.0179. Macroeconomic data showed that Switzerland’s consumer prices slid on a monthly basis in December, meeting market expectations, while the SVME-purchasing managers’ index dropped in December, at par with market consensus. The pair traded at a high of 1.0335 and a low of 1.0087 during the previous week. The pair is expected to find its first support at 1.0062 and first resistance at 1.0310. The second support is expected at 0.9950 and second resistance at 1.0446. Ahead in the week, market participants will closely monitor Switzerland’s unemployment rate and retail sales data, to gain better insights into the nation’s economy.
USDCAD
The USD traded 1.45% lower against the CAD last week, with the pair closing at 1.3235. The Canadian Dollar gained ground, after Canada’s net number of people employed unexpectedly climbed in December. Additionally, the nation’s posted an international merchandise trade surplus in November, as exports jumped and imports posted a modest gain. Moreover, the RBC manufacturing PMI edged higher in December. However, the nation’s unemployment rate advanced in line with market expectations in December. The USD hit a high of 1.3461 and a low of 1.3178 against the CAD in the previous week. Immediate downside, the first support level is seen at 1.3120, followed by 1.3007, while on the upside, the first resistance level situated in 1.3403, followed by 1.3573. Going forward, Canada’s existing home sales, new house price index, building permits and housing starts data, all due to release this week, would be eyed for further direction.
AUDUSD
The AUD strengthened against the USD last week, closing 1.05% higher at 0.7291, after Australia’s AiG performance of manufacturing index expanded strongly in December, whereas the AiG performance of services index advanced in the same month. Also, the nation surprisingly posted a trade surplus in November, as a jump in commodity prices boosted exports. The pair traded at a high of 0.7357 and a low of 0.7166 during the previous week. Immediate downside, the first support level is seen at 0.7194, followed by 0.7084, while on the upside, the first resistance level situated in 0.7385, followed by 0.7466. This week, market participants will focus on Australia’s AiG performance of construction index, building approvals and retail sales data.
Gold
Last week, gold rose 2.19% to close at USD1172.63 per ounce, amid increased risk aversion following uncertainty surrounding the pace of interest-rate hikes this year by the US Fed. The yellow metal hit a high of USD1185.90 per ounce and a low of USD1146.50 per ounce in the previous week. The yellow metal is expected to witness its first support at USD1151.17 per ounce and second support at USD1129.13 per ounce, while the first resistance is expected at USD1190.57 per ounce and second resistance at USD1207.93 per ounce.
Crude Oil
Last week, crude oil traded 0.5% higher and ended at USD53.99 per barrel, after news emerged that Saudi Arabia has started to trim crude production to meet OPEC’s agreement in order to stabilize oil market. Gains in crude prices were boosted further, after the Energy Information Administration (EIA) showed that US crude oil inventories fell more than expected by 7.1 million barrels to 479.0 million barrels in the week ended 30 December, while the American Petroleum Institute (API) indicated that US crude stockpiles narrowed more than estimated by 7.4 million barrels last week. Last week, the commodity traded at a high of USD55.24 per barrel and a low of USD52.11 per barrel. The commodity is expected to find its first support at USD52.08 per barrel and first resistance at USD55.21 per barrel. The second support is expected at USD50.53 per barrel and second resistance at USD56.79 per barrel.
Good trades, Traders.
