The highlight of the week was the US Federal Reserve (Fed) Chair, Janet Yellen’s testimony and minutes of the European Central Bank’s (ECB) latest meeting.
The greenback ended the week higher against most of its major currencies, after the US Fed Chairwoman, Janet Yellen, struck a hawkish tone on the timing of next interest rate hike. Yellen stated that interest rates hikes are warranted in the coming months, if the economy meets the central bank’s outlook of inflation and tightening labor markets. However, she warned against waiting too long to tighten monetary policy and flagged considerable uncertainty over economic policy under the Trump administration. Also, the Boston Fed President, Eric Rosengren, stated that more than three rate hikes could be called for this year, as the US economy is on a sound footing. Separately, the Atlanta Fed President, Dennis Lockhart, suggested that the central bank should not rush to raise interest rates and instead evaluate how the new Trump administration’s policies may affect the economy, while the Philadelphia Fed President, Patrick Harker, suggested that the economy needs three rate hikes in 2017.
In other economic news, annual consumer prices in the US surged at the fastest pace in nearly four years in January, led by higher costs for gasoline, thus signaling that inflation may be gaining traction. Further, the nation’s retail sales jumped in January, reinforcing views that consumer demand will remain one of the pillars for economic growth in the first quarter of 2017. Additionally, the nation’s building permits jumped to its highest level since November 2015 in January, whereas housing starts fell in the same month. In contrast, the nation’s industrial production disappointed with an unexpected drop in January, recording its biggest decline since September 2016.
The Euro ended the week on a weaker footing against the USD. According to minutes of the ECB’s latest monetary policy meeting, officials broadly agreed to look through the energy-driven recent upturns in headline inflation and sought patience as they judged that the region’s economy required a substantial monetary stimulus to bring price growth to the central bank’s target.
The Pound ended the week lower against the USD, after the latest jobs report indicated that UK’s average earnings including bonus surprisingly slowed in the three months to December, highlighting that wage growth could well remain soft in coming months. However, the nation’s ILO unemployment rate remained unchanged at an 11-year low level of 4.8% in the three months to December, meeting market expectations. Separately, the nation’s annual inflation grew at the fastest annual pace since June 2014 in January, on the back of weak Pound and higher oil prices.
EURUSD
The EUR traded 0.25% lower against the USD last week, with the pair closing at 1.0611, after the Eurozone’s gross domestic product (GDP) was revised down to 0.4% on a quarterly basis in 4Q 2016. Moreover, the region’s ZEW economic sentiment index dropped more than expected in February, while seasonally adjusted industrial production eased in December. Meanwhile, the European Commission (EC) predicted that the Eurozone’s economic growth is set to ease this year, but the slowdown would be less severe than expected earlier in November. Separately, Germany’s seasonally adjusted flash GDP expanded less than estimated by 0.4% on a quarterly basis in the fourth quarter of 2016. Meanwhile, the nation’s annual inflation climbed 1.9% in January, confirming the preliminary estimates. On the other hand, the nation’s ZEW economic sentiment index deteriorated in February. The pair traded at a high of 1.0679 and a low of 1.0521 during the previous week. The pair is expected to witness its first support at 1.0526 and second support at 1.0445, while the first resistance is expected at 1.0684 and second resistance at 1.0761. Going ahead, investors will closely monitor the release of preliminary Markit manufacturing and services PMI across the Euro-zone for February, scheduled to release this week. Additionally, the Eurozone’s final inflation figures and consumer confidence index coupled with Germany’s final GDP, Ifo expectations index and GfK consumer confidence survey data, will pique significant amount of investor attention.
GBPUSD
During the previous week, the GBP traded 0.62% lower against the USD and ended at 1.2412, after Britain’s average earnings including bonus rose less than expected in the October-December period. Meanwhile, the nation’s ILO unemployment rate remained unchanged at 4.8% in the three months to December, in line with market expectations. Moreover, the nation’s retail sales unexpectedly eased in January. On the contrary, the nation’s annual consumer prices advanced 1.8% in January. Separately, the European Commission upgraded Britain’s growth forecasts for 2017, but still expects a more severe hit to the economy eventually as Brexit will start to take effect on business decisions and inflation begins to rise at a quicker pace. The Commission now expects UK economy to expand by 1.5% in 2017, up from 1.0% predicted earlier in November. For 2018, the EC has penciled in a slowdown in growth to 1.2%. During the previous week, the pair traded at a high of 1.2548 and a low of 1.2383. The pair is expected to witness its first support at 1.2348 and second support at 1.2283, while the first resistance is expected at 1.2513 and second resistance at 1.2613. Moving ahead, this week market participants would focus on the BoE Governor, Mark Carney’s speech along with Britain’s flash 4Q GDP public sector net borrowings and BBA mortgage approvals data.
USDJPY
The USD traded 0.3% lower against the JPY last week, with the pair closing at 112.85. In economic news, Japan’s flash GDP grew weaker than anticipated by 0.2% on a quarterly basis n 4Q 2016. On the contrary, the nation’s final industrial production climbed in December. The USD hit a high of 114.96 and a low of 112.62 against the JPY in the previous week. Immediate downside, the first support level is seen at 112.03, followed by 111.16, while on the upside, the first resistance level situated in 114.37, followed by 115.84. This week, market participants would await the release of Japan’s flash Nikkei PMI for February and all industry activity index for December.
USDCHF
During the previous week, the USD traded slightly higher against the CHF and ended at 1.0025. On the macro front, Switzerland’s consumer price index (CPI) surprisingly remained flat on a monthly basis in January. The pair traded at a high of 1.0119 and a low of 0.9967 during the previous week. Immediate downside, the first support level is seen at 0.9958, followed by 0.9886, while on the upside, the first resistance level situated in 1.0110, followed by 1.0190. Looking ahead, Switzerland’s trade balance figures, UBS consumption indicator, ZEW survey of expectations and industrial production data, all slated to release this week, will garner a lot of market attention.
USDCAD
The USD traded 0.15% higher against the CAD last week, with the pair closing at 1.3097. On the macro front, Canada’s unemployment rate unexpectedly dropped to 6.8% in January, as the economy added 48,300 jobs in the same month. On the other hand, the nation’s existing home sales fell in January. During the previous week, the pair traded at a high of 1.3126 and a low of 1.3010. The pair is expected to find its first support at 1.3031 and first resistance at 1.3147. The second support is expected at 1.2962 and second resistance at 1.3194. Ahead in the week, traders would turn their attention to Canada’s crucial inflation numbers and retail sales data, to get better insights into the nation’s economy.
AUDUSD
During the previous week, the AUD traded marginally higher against the USD and ended at 0.7669. Macroeconomic data revealed that Australia’s seasonally adjusted unemployment rate unexpectedly eased to 5.7% in January. Moreover, the nation’s NAB business confidence index surged in January, whereas the NAB business conditions index jumped in the same month. Further, the Westpac consumer confidence index rose in February. Meanwhile, the nation’s consumer inflation expectations declined in the same month. The AUD hit a high of 0.7732 and a low of 0.7618 against the USD in the previous week. The pair is expected to find its first support at 0.7613 and first resistance at 0.7727. The second support is expected at 0.7559 and second resistance at 0.7787. Moving ahead, investors will focus on RBA’s recent meeting minutes and a speech by its Governor, Philip Lowe, both scheduled this week.
Gold
During the previous week, gold traded 0.08% higher and ended at USD1234.60 per ounce, as global political uncertainties boosted demand for the precious yellow metal. Gold hit a high of USD1245.10 per ounce and a low of USD1217.50 per ounce during the previous week. The yellow metal is expected to witness its first support at USD1221.10 per ounce and second support at USD1205.50 per ounce, while the first resistance is expected at USD1248.70 per ounce and second resistance at USD1260.70 per ounce.
Crude Oil
Crude oil fell in the previous week, closing 0.85% lower at USD53.40 per barrel, after the Energy Information Administration (EIA), in its monthly report, forecasted that US shale oil production for March is expected to rise by the most since October 2016. Oil prices failed to find support, after the Energy Information Administration (EIA) reported that US crude stockpiles jumped 9.5 million barrels to 518.1 million barrels during the week ended 10 February, while the American Petroleum Institute (API) disclosed that crude oil inventories jumped 9.9 million barrels to 513.5 million barrels last week. Crude oil witnessed a high of USD53.72 per barrel and a low of USD52.68 per barrel last week. Immediate downside, the first support level is seen at USD52.81 per barrel, followed by USD52.22 per barrel, while on the upside, the first resistance level situated in USD53.85 per barrel, followed by USD54.30 per barrel.
Good trades Traders.
