Last week, the forex market was dictated by monetary policy decisions of key central banks and the release of mixed US jobs report.
The US Dollar ended the week lower against the key currencies, after the latest US jobs report painted a gloomy picture of the US economy. Non-farm payrolls data indicated that US economy added most number of jobs in 4-months in January. However, the nation’s average hourly earnings of all employees disappointed with a weaker than expected rise in January, prompting investors to bet against a near-term interest rate rise from the Federal Reserve (Fed). Also, the unemployment rate edged up to 4.8% in January. Separately, the US Fed, in its latest monetary policy meeting, maintained benchmark interest rates steady as expected, with the Chair, Janet Yellen, giving few clues about the timing of the next interest rate rise. However, policymakers remained optimistic on the outlook for the US economy.
In other economic news, the US ISM manufacturing activity topped market expectations in January, while the non-manufacturing PMI unexpectedly eased in the same month. Meanwhile, ADP’s private sector employment climbed in January, while initial jobless claims dropped higher than expected in the week ended 28 January 2017, pointing towards a tighter labor market. Also, growth in the services sector was revised higher in January. On the other hand, the nation’s consumer confidence dropped in January.
The GBP ended the week in negative territory against the USD, after the Bank of England (BoE), in its latest monetary policy meeting, played down the possibility of near-term interest rate hike, while leaving the key interest rate steady at a record low level of 0.25%. Further, the central bank lifted its growth outlook for 2017 and 2018. The bank now expects economic growth of 2.0% this year, up from 1.4% estimated in November, while also raising growth-forecast for 2018 and 2019 to 1.6% and 1.7% respectively. Moreover, policymakers signaled that they are in no rush to raise interest rate as Britain’s exit from the European Union continues to cast uncertainty.
Euro ended the week on a stronger footing, after the Eurozone’s flash consumer price index (CPI) surged to its highest level in nearly 4 years on an annual basis in January, a development that is likely to amplify calls for the European Central Bank to reconsider its monetary policy stance. Additionally, the region’s preliminary gross domestic product (GDP) showed that the economy expanded as expected on a quarterly basis in the fourth quarter. Further, the region’s unemployment rate surprisingly plummeted to a 7-year low level of 9.6% in December, highlighting that the labor market is gaining strong momentum.
EURUSD
The EUR strengthened against the USD last week, closing 0.81% higher at 1.0781, after the Eurozone’s flash CPI jumped 1.8% on an annual basis in January, while preliminary GDP expanded 0.5% on a quarterly basis in the fourth quarter, meeting market expectations. Further, the region’s unemployment rate surprisingly declined in December. Additionally, the region’s final Markit manufacturing PMI rose above expectations in January, whereas the services sector growth was surprisingly revised upwards in the same month. In contrast, the region’s retail sales unexpectedly dropped in December. Separately, Germany’s annual inflation surged 1.9% on an annual basis in January, whereas unemployment rate unexpectedly declined to a record low level of 5.9% in January. Also, the nation’s manufacturing PMI rose in January and the services sector growth slightly advanced in the same month. During the previous week, the pair traded at a high of 1.0829 and a low of 1.0620. Immediate downside, the first support level is seen at 1.0657, followed by 1.0534, while on the upside, the first resistance level situated in 1.0866, followed by 1.0952. This week, investors’ would focus on the Eurozone’s Sentix investor confidence index, along with Germany’s industrial production, trade balance as well as factory orders data.
GBPUSD
During the previous week, the GBP traded 0.49% lower against the USD and ended at 1.2485, after the BoE, in its latest monetary policy meeting, indicated that it is in no rush to hike interest rates in the near-term. The BoE, in a widely expected move, kept the key interest rate steady at 0.25%. In other economic news, UK’s Markit manufacturing PMI edged down in January, while services PMI eased more than expected in the same month. Also, the nation’s construction PMI dropped in January. Meanwhile, the nation’s net consumer credit rose less than expected in December, while the GfK consumer confidence unexpectedly improved in January. On the contrary, the nationwide house prices rose in the same month. The pair traded at a high of 1.2706 and a low of 1.2413 during the previous week. The pair is expected to find its first support at 1.2363 and first resistance at 1.2656. The second support is expected at 1.2241 and second resistance at 1.2827. Looking ahead, traders would focus on UK’s NIESR GDP estimate, total trade balance, industrial and manufacturing production, construction output and RICS house price balance data, all scheduled to release this week.
USDJPY
Last week, the USD traded 2.05% lower against the JPY and closed at 112.70. The Japanese Yen gained ground against the USD, after the Bank of Japan (BoJ), in its latest monetary policy meeting, raised Japan’s growth outlook, while keeping the benchmark interest rate steady at -0.1%, as widely anticipated. The central bank also pledged to continue with its yield curve control program. Further, policymakers also boosted their growth-outlook for fiscal year 2016 to 1.4% from a prior estimate of 1.0% made in October, while fiscal 2017 growth was also upwardly revised to 1.5% from 1.3% in October. Meanwhile, minutes of the December meeting disclosed that most of the board members believe that Japanese economy remains on a moderate recovery path. In other economic news, Japan’s unemployment rate remained steady at 3.1% in December, meeting market expectations. Additionally, the nation’s preliminary industrial production advanced more than expected in December. Moreover, the nation’s final Nikkei manufacturing PMI advanced in January, while services PMI eased in the same month. The pair traded at a high of 114.94 and a low of 112.06 during the previous week. The pair is expected to find support at 111.52, and a fall through could take it to the next support level of 110.35. The pair is expected to find its first resistance at 114.40, and a rise through could take it to the next resistance level of 116.11. Moving ahead, market participants look forward to Japan’s flash leading and coincident indices, BoJ’s summary of opinions report, trade balance (BOP basis) and Eco-Watchers survey data, all slated to release this week.
USDCHF
The USD traded 0.66% lower against the CHF last week, with the pair closing at 0.9924. On the economic front, Switzerland’s real retail sales eased more than anticipated on an annual basis in December. Further, the nation’s KOF economic barometer index unexpectedly dropped in January, while the SVME purchasing managers’ index fell more than expected in the same month. The USD hit a high of 1.0045 and a low of 0.9862 against the CHF in the previous week. The pair is expected to find support at 0.9844, and a fall through could take it to the next support level of 0.9761. The pair is expected to find its first resistance at 1.0027, and a rise through could take it to the next resistance level of 1.0127. Going ahead, Switzerland’s unemployment rate and SECO consumer confidence data, scheduled to release this week, will be on investors’ radar.
USDCAD
Last week, the USD traded 0.97% lower against the CAD and closed at 1.3022. The Canadian Dollar gained ground, after Canada’s GDP expanded faster than estimated on a monthly basis in November, driven by strength in the manufacturing sector. Also, the nation’s RBC purchasing managers’ index soared in January. The pair traded at a high of 1.3169 and a low of 1.2969 during the previous week. The pair is expected to witness its first support at 1.2942 and second support at 1.2856, while the first resistance is expected at 1.3142 and second resistance at 1.3256. Going forward, investors would turn their attention to Canada’s jobs report and new house price index, both scheduled to release this week.
AUDUSD
The AUD strengthened against the USD last week, closing 1.82% higher at 0.7683. In economic news, Australia’s AiG performance of manufacturing index eased in January, while AIG performance of services index fell in the same month. On the other hand, the nation’s NAB business confidence index advanced in December and the business conditions index climbed in the same month. Other economic data showed that Australia’s trade surplus widened in December, as export growth outpaced that of imports. On the contrary, the nation’s building permits declined in December. During the previous week, the pair traded at a high of 0.7696 and a low of 0.7528. Immediate downside, the first support level is seen at 0.7575, followed by 0.7468, while on the upside, the first resistance level situated in 0.7743, followed by 0.7804. Looking ahead, market participants await the Reserve Bank of Australia’s (RBA) interest rate decision along with Australia’s AiG performance of construction index, retail sales and HIA new home sales data, all set to release this week.
Gold
During the previous week, gold traded 2.44% higher and ended at USD1220.30 per ounce, after the latest US jobs data flagged up weak wage growth, thus dampening prospects of near-term interest rate hikes by the Federal Reserve. Gold hit a high of USD1227.50 per ounce and a low of USD1190.00 per ounce during the previous week. Immediate downside, the first support level is seen at USD1197.97 per ounce, followed by USD1175.23 per ounce, while on the upside, the first resistance level situated in USD1235.47 per ounce, followed by USD1250.23 per ounce.
Crude Oil
Crude oil traded 1.24% higher in the previous week, closing at USD53.83 per barrel, amid rising concerns that US sanctions on Iran could hamper the nation’s crude supplies. However, oil prices pared some of its gains after the Energy Information Administration (EIA) reported a build of 6.5 million barrels in US crude stockpiles to 494.8 million barrels during the week ended 27 January 2017, while the American Petroleum Institute (API) indicated that US crude oil inventories rose by 5.8 million barrels to 488.0 million barrels in the week ended 27 January 2017. The commodity hit a high of USD54.34 per barrel and a low of USD52.24 per barrel in the previous week. The commodity is expected to find its first support at USD52.61 per barrel and first resistance at USD54.71 per barrel. The second support is expected at USD51.37 per barrel and second resistance at USD55.57 per barrel.
Good trades Traders.
