Last week, the forex market was dictated by hawkish comments from the US Federal Reserve (Fed) Chairwoman, Janet Yellen and some top Fed officials.
The greenback ended the week higher against its major peers, after the Fed Chair, Janet Yellen, cemented a March interest rate hike. Yellen indicated that an interest rate hike in this month would be "appropriate", if employment and other economic data hold up. Additionally, the Dallas Fed President, Robert Kaplan, stated that the Fed might need to raise interest rates in the near future, while the San Francisco Fed President, John Williams, stated that a March interest rate hike “is on the table for serious consideration”. Separately, the US President, Donald Trump, in his address to Congress, called for major infrastructure spending of around $1.0 trillion, but did not elaborate on any key details about his economic plans.
Gains in the greenback were boosted further, after the US ISM manufacturing index showed a strong performance in February, surging to its highest level in over 2 years, while the ISM non-manufacturing index expanded at its fastest pace in nearly 2 years, suggesting that the economic activity may be on the rise. Also, the nation’s initial jobless claims unexpectedly dropped to a nearly 44-year low level in the week ended 25 February 2017. Meanwhile, the second estimate of annualized gross domestic product confirmed that the US economic growth slowed to 1.9% in 4Q 2016, amid lower government spending and weaker business investment. Also, the nation’s flash durable goods orders rebounded in January, on the back of a pick-up in demand for commercial and military aircrafts. Meanwhile, the CB consumer confidence index surprisingly climbed to a 15-year high level in February.
On the other hand, the nation’s advance goods trade deficit widened sharply in February, while pending home sales surprisingly plummeted to its lowest level in 12 months in January. Moreover, the nation’s construction spending unexpectedly fell in January, dipping to its lowest level in 9 months. Separately, according to the Fed’s Beige Book report, the US economy continued to expand at a modest-to-moderate pace from early January through mid-February, while some districts reported “widening labor shortages”. However, it also noted that US business optimism has cooled a bit in the wake of the Presidential election.
The Euro ended the week higher against the USD, after the Eurozone’s flash inflation spiked to a 4-year high level of 2.0% YoY in February, zooming past the European Central Bank’s (ECB) inflation target, indicating that the central bank is likely to face renewed pressure to taper its ultra-loose monetary policy. Further, the region’s manufacturing sector notched its highest level since April 2011 in February, as a weaker Euro led to strong demand for the region’s exports.
EURUSD
The EUR traded 0.57% higher against the USD last week, with the pair closing at 1.0620, after the Eurozone’s flash consumer price index (CPI) jumped 2.0% on an annual basis in February, meeting market expectations. Moreover, the region’s unemployment rate remained steady at 9.6% in January. Moreover, the region’s final Markit manufacturing PMI and the services PMI, both were revised slightly lower in February. On the other hand, the region’s retail sales surprisingly fell in February. Separately, Germany’s manufacturing sector activity advanced less than initially estimated in February, while growth in services sector came in line with flash estimates in the same month. Moreover, the nation’s preliminary inflation accelerated 2.2% on an annual basis in February. Also, the nation’s seasonally adjusted unemployment rate remained unchanged at 5.9% in February, at par with market expectations. The EUR hit a high of 1.0631 and a low of 1.0495 against the USD in the previous week. Immediate downside, the first support level is seen at 1.0530, followed by 1.0445, while on the upside, the first resistance level situated in 1.0666, followed by 1.0717. This week, investors’ will focus on the European Central Bank’s interest rate decision along with the Eurozone’s 4Q gross domestic product (GDP), the Sentix investor confidence index and OECD economic outlook report. Additionally, Germany’s Markit construction PMI as well as industrial production data would also be keenly watched by investors’.
GBPUSD
The GBP traded 1.4% lower against the USD last week, with the pair closing at 1.2290, after Britain’s Markit manufacturing PMI unexpectedly declined in February, while the services PMI weakened more than expected in the same month. Further, the nation’s GfK consumer confidence index eased in February, meeting market expectations. Another set of data revealed that UK’s mortgage approvals climbed more than anticipated in January, whereas net consumer credit grew in line with expectations in the same month. Moreover, the Markit construction PMI unexpectedly rose in February. The GBP hit a high of 1.2479 and a low of 1.2215 against the USD in the previous week. The pair is expected to witness its first support at 1.2182 and second support at 1.2067, while the first resistance is expected at 1.2446 and second resistance at 1.2595. Looking ahead, UK’s industrial and manufacturing production, total trade balance, NIESR GDP estimate and RICS house price balance data, set to release this week, would generate a lot of market attention.
USDJPY
The USD traded 1.61% higher against the JPY last week, with the pair closing at 113.99. In economic news, data showed that Japan’s national CPI advanced 0.4% on an annual basis in January, at par with market expectations. Additionally, the nation’s unemployment rate dropped to 3.0% in January, meeting market expectations, while seasonally adjusted retail trade rebounded in the same month. Further, the nation’s final Nikkei manufacturing PMI rose in February, while the services PMI eased in the same month. Other data revealed that Japan’s preliminary industrial production unexpectedly dropped in January, while large retailers’ sales recorded a more than expected drop in the same month. Also, the nation’s small business confidence index surprisingly dropped in February and the consumer confidence index unexpectedly fell in the same month. The USD hit a high of 114.75 and a low of 111.69 against the JPY in the previous week. The pair is expected to find support at 112.15, and a fall through could take it to the next support level of 110.39. The pair is expected to find its first resistance at 115.21, and a rise through could take it to the next resistance level of 116.51. Looking ahead, traders will await the release of Japan’s 1Q GDP, trade balance and Eco-Watchers survey data, all due this week.
USDCHF
The USD rose against the CHF last week, closing marginally higher at 1.0075. On the data front, Switzerland’s seasonally adjusted GDP rose less than expected by 0.1% on a quarterly basis in 4Q 2016. On the contrary, the nation’s real retail sales declined on an annual basis in January, while the SVME-purchasing managers’ index (PMI) rose more than estimated in February. In other economic news, Switzerland’s KOF leading indicator came in stronger than expected in February, while the UBS consumption indicator climbed less than expected in January. The USD hit a high of 1.0146 and a low of 1.0009 against the CHF in the previous week. Immediate downside, the first support level is seen at 1.0016, followed by 0.9944, while on the upside, the first resistance level situated in 1.0153, followed by 1.0218. Moving ahead, traders will look forward to Switzerland’s consumer price index and unemployment rate data, all slated to release this week.
USDCAD
Last week, the USD traded 2.18% higher against the CAD and closed at 1.3375. Last week, the Bank of Canada (BoC) left key interest rate steady at 0.5% and reiterated previous warnings about the “significant uncertainties” faced by the Canadian economy. The central bank further stated that while there have been recent gains in employment, subdued growth in wages and hours worked continue to reflect persistent economic slack in Canada. In other economic news, Canada’s GDP climbed on a monthly basis in December, meeting market anticipations, whereas the RBC manufacturing PMI advanced in February. The pair traded at a high of 1.3437 and a low of 1.3084 during the previous week. The pair is expected to find its first support at 1.3162 and first resistance at 1.3515. The second support is expected at 1.2947 and second resistance at 1.3653. Going ahead, market participants will closely watch Canada’s Ivey–PMI and the new house price index, due later this week.
AUDUSD
Last week, the AUD traded 0.98% lower against the USD and closed at 0.7594. Macroeconomic data showed that Australia’s GDP expanded more than expected by 1.1% on a quarterly basis in the fourth quarter of 2016. Further, the nation’s AiG performance of manufacturing index advanced in February, whereas building approvals surprisingly increased in January. On the contrary, Australia’s service sector activity contracted in February, while seasonally adjusted trade surplus unexpectedly narrowed in January. Additionally, the nation’s HIA new home sales dropped in January. The AUD hit a high of 0.7708 and a low of 0.7543 against the USD in the previous week. The pair is expected to find support at 0.7521, and a fall through could take it to the next support level of 0.7450. The pair is expected to find its first resistance at 0.7686, and a rise through could take it to the next resistance level of 0.7780. This week, investors’ will closely monitor the Reserve Bank of Australia’s (RBA) interest rate decision coupled with Australia’s retail sales data.
Gold
Gold fell last week, closing 1.78% lower at USD1234.81 per ounce, after hawkish remarks from the Fed Chair, Janet Yellen and some key Fed officials raised expectations for an interest rate hike in March. The yellow metal hit a high of USD1264.90 per ounce and a low of USD1223.00 per ounce in the previous week. The precious metal is expected to find its first support at USD1216.90 per ounce and first resistance at USD1258.80 per ounce. The second support is expected at USD1199.00 per ounce and second resistance at USD1282.80 per ounce.
Crude Oil
Crude oil traded 1.22% lower in the previous week, closing at USD53.33 per barrel, after data revealed that the Russian crude production remained unchanged in February, pointing towards weak compliance with a global deal to curb oil supply. Oil prices failed to find support, after the Energy Information Administration (EIA) showed that US crude oil inventories rose by 1.5 million barrels to 520.2 million barrels during the week ended 24 February, advancing for an eighth straight week, while the American Petroleum Institute (API) indicated that US crude oil stockpiles rose 2.5 million barrels to 515.2 million barrels last week. The commodity hit a high of USD54.61 per barrel and a low of USD52.54 per barrel in the previous week. Crude oil is expected to its find support at USD52.30 per barrel, and a fall through could take it to the next support level of USD51.38 per barrel. The yellow metal is expected to find its first resistance at USD54.37 per barrel, and a rise through could take it to the next resistance level of USD55.52 per barrel.
Good trades Traders.
