Last week the forex market was dictated by comments from the US President, Donald Trump and the European Central Bank President, Mario Draghi.
The greenback ended the week higher against the basket of major currencies, after the US President vowed to make a major announcement on a “phenomenal” tax plan in the next few weeks. Meanwhile, the Federal Reserve (Fed) Bank of St. Louis President, James Bullard, rooted for only one interest rate hike this year and stated that interest rates can likely remain low through at least 2017, as there is no clear indication as to whether Donald Trump’s fiscal policies will lead to either higher inflation or growth in the country. Separately, the Chicago Fed President, Charles Evans, favored for gradual interest rate hikes this year as he expects an economic boost from the US President’s planned fiscal policies. Also, over the weekend, the Fed Vice Chair, Stanley Fischer, noted that there was significant uncertainty about the Trump administration’s planned fiscal policies, but the central bank is focused in meeting its dual mandate of creating full employment and getting inflation to 2.0%.
In other economic news, data indicated that fresh unemployment benefits in the US unexpectedly fell to a 3-month low level in the week ended 04 February, thus painting a healthy picture of the nation’s labor market. Also, the nation’s final wholesale inventories advanced in December, in line with preliminary estimates. Further, the nation’s trade deficit narrowed more than expected in December, buoyed by a sharp increase in exports, while the MBA mortgage applications rebounded in the week ended 03 February 2017. Meanwhile, the nation’s consumer credit grew at its slowest pace in six months in December. On the other hand, the nation’s flash Reuters/Michigan consumer sentiment index deteriorated in February.
The Euro ended the week in negative territory against the USD, after the ECB President downplayed calls for the bank to scale back its stimulus program, stating that the Eurozone’s economy as well as underlying inflation was not yet strong enough to withdraw stimulus. He further stated that the pick-up in inflation was driven mainly by higher energy prices. Draghi also shrugged off allegations of currency manipulation.
The AUD ended the week lower against the USD. The Reserve Bank of Australia (RBA), in its first meeting of the year, kept the benchmark interest rate unchanged at 1.5%, as widely expected, while offering an upbeat assessment of the long-term economic outlook. The RBA also continues to hold the view espoused in its most recent statement on monetary policy that economic growth will be around 3.0% over the next couple of years and that inflation would pick up to above its 2.0% target over the course of this year.
EURUSD
The EUR traded 1.33% lower against the USD last week, with the pair closing at 1.0638, after the ECB President, Mario Draghi, stated that recent spike in inflation will not prompt the ECB to end its ultra-loose monetary policy sooner than planned, as it is driven mainly by higher energy prices. In other economic news, the Eurozone’s Sentix investor confidence index fell less than expected in February. Separately, Germany’s seasonally adjusted factory orders rebounded in December. On the other hand, the nation’s Markit construction PMI edged down in January. Moreover, the nation’s seasonally adjusted industrial production unexpectedly dropped in December and the seasonally adjusted trade surplus narrowed more than expected in the same month. During the previous week, the pair traded at a high of 1.0789 and a low of 1.0608. The pair is expected to find support at 1.0567 and a fall through could take it to the next support level of 1.0497. The pair is expected to find its first resistance at 1.0748, and a rise through could take it to the next resistance level of 1.0859. This week, investors would keep a close watch on flash GDP figures and ZEW economic sentiment index across the Eurozone along with the ECB’s latest meeting minutes. Also, the European Commission’s economic growth forecast report accompanied with Germany’s Buba monthly report and final consumer price inflation data, will be eyed by traders.
GBPUSD
Last week, the GBP traded marginally higher against the USD and closed at 1.2489. Last week, Britain’s lower house of Parliament passed legislation to allow the British Prime Minister, Theresa May’s government to officially begin the Brexit process. On the macro front, UK’s industrial and manufacturing production, both climbed more than estimated in December. Further, the nation’s total trade deficit fell more than anticipated in December. Additionally, the NIESR estimated that UK economy grew 0.7% in the three months to January 2017. Also, the nation’s construction output increased in December and the RICS house price balance surprisingly rose in January. In contrast, the nation’s Halifax house prices unexpectedly declined in January. The pair traded at a high of 1.2582 and a low of 1.2347 during the previous week. The pair is expected to find support at 1.2361, and a fall through could take it to the next support level of 1.2237. The pair is expected to find its first resistance at 1.2596, and a rise through could take it to the next resistance level of 1.2707. Looking ahead, market participants would anxiously await UK’s consumer price index, ILO unemployment rate and retail sales data, all set to release this week.
USDJPY
During the previous week, the USD traded 0.43% higher against the JPY and ended at 113.19. According to the Bank of Japan’s (BoJ) summary of opinions report from its January meeting, board members saw improvements in Japan’s exports, consumer spending and capital expenditure. However, officials warned that it may take time for inflation expectations to pick up and that its 2.0% inflation target still remains elusive. Another set of data revealed that Japan’s Eco-Watchers survey for the current situation and for the future outlook, both unexpectedly dropped in January, whereas the tertiary industry index fell in December. On the other hand, the nation’s trade surplus (BOP basis) advanced in December. Also, the nation’s machinery orders rebounded in December, while preliminary machine tool orders rose in January. The USD hit a high of 113.86 and a low of 111.60 against the JPY in the previous week. Immediate downside, the first support level is seen at 112.02, followed by 110.68, while on the upside, the first resistance level situated in 114.28, followed by 115.20. Moving ahead, market participants will look forward to Japan’s flash 4Q GDP, final industrial production and final machine tool orders data, all slated to release this week.
USDCHF
During the previous week, the USD traded 0.97% higher against the CHF and ended at 1.0020. Macroeconomic data indicated that Switzerland’s seasonally adjusted unemployment rate remained unchanged at 3.3% in January, meeting market expectations. Meanwhile, the nation’s SECO consumer confidence index improved in the three months to January. During the previous week, the pair traded at a high of 1.0062 and a low of 0.9904. The pair is expected to witness its first support at 0.9935 and second support at 0.9840, while the first resistance is expected at 1.0093 and second resistance at 1.0156. Looking ahead, traders would concentrate on Switzerland’s consumer price inflation figures, the sole important release this week.
USDCAD
Last week, the USD traded 0.43% higher against the CAD and closed at 1.3078. The Canadian Dollar lost ground, after Canada’s building permits dropped more than estimated in December. Additionally, the nation’s seasonally adjusted Ivey–purchasing managers’ index (PMI) eased in January. Further, the nation’s international merchandise trade surplus narrowed in December. Other economic data revealed that Canada’s unemployment rate unexpectedly dropped to 6.8% in January, as the economy added 48,300 jobs in the same month. Further, the nation’s seasonally adjusted housing starts unexpectedly climbed in January and the new housing price index advanced in December. The USD hit a high of 1.3212 and a low of 1.3007 against the CAD in the previous week. Immediate downside, the first support level is seen at 1.2991, followed by 1.2897, while on the upside, the first resistance level situated in 1.3196, followed by 1.3307. Ahead in the week, investors would focus on Canada’s existing home sales data.
AUDUSD
Last week, the AUD traded 0.18% lower against the USD and closed at 0.7669. Last week, the Reserve Bank of Australia (RBA), in its latest monetary policy meeting, kept the benchmark interest rate unchanged at 1.5%, as widely expected, while noting better economic conditions in the nation. Separately, the RBA Governor, Philip Lowe, remained upbeat on the nation’s economy and added that the Australian economy is likely to return to reasonable growth in the fourth quarter of 2016. Meanwhile, the central bank, in its quarterly statement on monetary policy, trimmed its near-term growth forecasts to 1.5% to 2.5% in the year to June 2017, while leaving inflation estimates unchanged. In other economic news, data indicated that Australia’s HIA new home sales climbed in December, while the AIG performance of construction index rose in January. On the other hand, the nation’s business confidence index eased in 4Q 2016, whereas seasonally adjusted retail sales unexpectedly fell in December. During the previous week, the pair traded at a high of 0.7689 and a low of 0.7606. The pair is expected to find support at 0.7625 and a fall through could take it to the next support level of 0.7574. The pair is expected to find its first resistance at 0.7708, and a rise through could take it to the next resistance level of 0.7740. This week, market participants will focus on the release of Australia’s unemployment rate, consumer inflation expectations, NAB business confidence and Westpac consumer confidence data.
Gold
During the previous week, gold traded 1.09% higher and ended at USD1233.62 per ounce, as political risks in Europe and economic uncertainty in the US stoked demand for the safe haven yellow metal. The yellow metal witnessed a high of USD1246.60 per ounce and a low of USD1221.70 per ounce in the previous week. The yellow metal is expected to witness its first support at USD1222.53 per ounce and second support at USD1209.67 per ounce, while the first resistance is expected at USD1247.43 per ounce and second resistance at USD1259.47 per ounce.
Crude Oil
Crude oil traded 0.06% higher in the previous week, closing at USD53.86 per barrel, after the International Energy Agency (IEA) reported that production from the Organization of Petroleum Exporting Countries (OPEC) fell by 1.0 million barrels per day million bpd to 32.06 million bpd in January, marking a record initial compliance level of 90.0% to reduce the global oil glut. Separately, the Energy Information Administration (EIA) showed that US crude oil stockpiles jumped by 13.8 million barrels to 508.6 million barrels in the week ended 03 February 2017, while the American Petroleum Institute (API) indicated that US crude oil inventories surged above expectations by 14.2 million barrels to 503.6 million barrels during the same week. The commodity traded at a high of USD54.13 per barrel and a low of USD51.22 per barrel in the previous week. The commodity is expected to find its first support at USD51.98 per barrel and first resistance at USD54.89 per barrel. The second support is expected at USD50.14 per barrel and second resistance at USD55.96 per barrel.
Good trades Traders.
