Last week, the forex market was dictated by monetary policy decisions of some key central banks and the Dutch Parliamentary elections.
The greenback ended the week lower against most of the major currencies, as the US Federal Reserve’s (Fed) cautious message on interest rates left investors disappointed. The Fed, in its latest monetary policy meeting, lifted the key interest rate by a quarter-percentage point to a range of 0.75% to 1.0%, a move prompted by steady economic growth, improving labor market and a recent uptick in inflation. The Fed Chief, Janet Yellen signaled that two more increases were on the cards for 2017. Meanwhile, officials left growth forecast at 2.1% for 2017 but slightly raised the projection to 2.1% for 2018.
In other economic news, inflation in the US surprisingly rose on a monthly basis in February, whereas the consumer sentiment index topped market expectations in March. Moreover, the nation’s advance retail sales posted its smallest increase in 6 months in February, while the NAHB housing market index surprisingly jumped to its highest level in almost 12 years in March, amid actions on regulatory reforms by the US President. Further, the nation’s initial jobless claims dropped last week and housing starts notched its highest level in 4 months in February, boosted by unseasonably warm weather. Also, the nation’s leading indicator surged to its highest level in more than a decade in February. Moreover, the nation’s manufacturing production advanced for a sixth consecutive month in February, while industrial output remained flat in the same month, as unseasonably warm weather again dragged down utilities. On the other hand, the nation’s building permits fell more than expected in February.
The GBP ended the week higher against the USD, after the Bank of England (BoE) policymaker, Kristin Forbes, surprised investors’ by calling for an interest rate hike at the March meeting. The BoE voted 8-1 to stand pat on monetary policy and decided to leave the bond-purchase program unchanged at £435.0 billion. The minutes from the meeting revealed that some other committee members appeared to be moving towards a rate hike if inflation or growth rise surprisingly.
In economic news, UK’s ILO unemployment rate dropped to its lowest level since 1975 in the three months to January. However, wage growth came in softer than expected in the same period, underlining concerns that consumer spending will be eroded as inflation rises.
The Euro ended the week higher against the USD, after the Dutch Prime Minister, Mark Rutte, easily defeated anti-EU candidate Geert Wilders, in a vote considered a bellwether of populist support in Europe.
EURUSD
The EUR traded 0.63% higher against the USD last week, with the pair closing at 1.0736, after the Dutch Prime Minister, Mark Rutte’s party won over anti-Islam lawmaker, Geert Wilders. The Euro was boosted further, after the Eurozone’s annual inflation climbed 2.0% in February. Moreover, the region’s ZEW economic sentiment index jumped in March, while seasonally adjusted industrial production grew less than expected in January. In contrast, the region’s trade surplus narrowed more than expected in January and seasonally adjusted construction output fell further in the same month. Meanwhile, the European Central Bank (ECB) policymaker, Ewald Nowotny, hinted that an interest rate hike could be on the cards by year end. Separately, German ZEW economic sentiment index rose less than expected in March, while the nation’s annual consumer price index advanced 2.2% in February, confirming the preliminary estimates. During the previous week, the pair traded at a high of 1.0782 and a low of 1.0600. The pair is expected to witness its first support at 1.0631 and second support at 1.0525, while the first resistance is expected at 1.0813 and second resistance at 1.0889. This week, investors would focus on the flash manufacturing and services PMI data across the Euro-zone along with the Eurozone’s preliminary consumer confidence index and ECB’s economic bulletin report to gauge strength in the European economy. Additionally, Germany’s Gfk consumer confidence data would also be keenly watched by investors’.
GBPUSD
The GBP advanced against the USD last week, closing 1.83% higher at 1.2392, after one of the BoE policymaker voted for an interest-rate increase. The BoE, maintained the benchmark interest rate steady at a record low of 0.25%, as widely expected. On the data front, UK’s ILO unemployment rate surprisingly dropped to 4.7% in November 2016-January 2017 period. Meanwhile, the nation’s average earnings including bonus advanced less than expected in the same period. Separately, the Scottish First Minister, Nicola Sturgeon, announced plans for a second independence referendum. The GBP hit a high of 1.2405 and a low of 1.2110 against the USD in the previous week. The pair is expected to find its first support at 1.2202 and first resistance at 1.2497. The second support is expected at 1.2009 and second resistance at 1.2599. Looking ahead, traders will anxiously await UK’s consumer price inflation figures, public sector net borrowings, retail sales and BBA mortgage approvals data, all slated to release this week.
USDJPY
The USD declined against the JPY last week, closing 1.78% lower at 112.70. Last week, the Bank of Japan (BoJ), in its latest monetary policy meeting, opted to keep the benchmark interest rate steady at -0.1% and pledged to guide the 10-year government bond yield at around 0.0%. Also, the pace of annual asset purchases remained unchanged at about ¥80.0 trillion. Also, the BoJ Governor, Haruhiko Kuroda, stated that an uptick in inflation towards 1.0% will not immediately prompt an interest rate hike. On the data front, Japan’s final machine tool orders advanced in February, meeting preliminary estimates. Meanwhile, the nation’s tertiary industry index surprisingly remained flat in January. On the other hand, the nation’s final industrial production fell less than initially estimated in January, whereas machinery orders unexpectedly dropped in the same month. During the previous week, the pair traded at a high of 115.20 and a low of 112.57. The pair is expected to find support at 111.78, and a fall through could take it to the next support level of 110.86. The pair is expected to find its first resistance at 114.41, and a rise through could take it to the next resistance level of 116.12. Looking ahead, investors’ will look forward to the BoJ’s recent meeting minutes accompanied with Japan’s flash Nikkei manufacturing PMI, adjusted merchandise trade balance and all industry activity index, set to release this week.
USDCHF
The USD fell against the CHF last week, closing 1.21% lower at 0.9985. The Swiss National Bank (SNB), at its latest monetary policy meeting, kept the benchmark interest rate at -0.75%, meeting market expectations. The central bank also reiterated that the Swiss Franc’s exchange rate is “significantly overvalued” and kept itself open to intervention in the foreign exchange market. Further, the bank continues to expect GDP growth of roughly 1.5% for 2017 and raised inflation forecast for 2017 to 0.3%, up from 0.1%, on the back of an increase in oil prices. On the macro front, Switzerland’s producer and import price index unexpectedly dropped on a monthly basis in February. The USD hit a high of 1.0117 and a low of 0.9943 against the CHF in the previous week. The pair is expected to find support at 0.9911, and a fall through could take it to the next support level of 0.9840. The pair is expected to find its first resistance at 1.0085, and a rise through could take it to the next resistance level of 1.0188. Moving ahead, investors’ will look forward to Switzerland’s SECO economic forecast, trade balance and SNB’s quarterly bulletin report, all due to release this week.
USDCAD
During the previous week, the USD traded 0.9% lower against the CAD and ended at 1.3348. In economic news, Canada’s existing home sales jumped in February. During the previous week, the pair traded at a high of 1.3495 and a low of 1.3277. The pair is expected to witness its first support at 1.3253 and second support at 1.3156, while the first resistance is expected at 1.3471 and second resistance at 1.3592. Going ahead, Canada’s consumer price index and retail sales data, both due to release this week, will be on investors’ radar.
AUDUSD
During the previous week, the AUD traded 2.1% higher against the USD and ended at 0.7698. In economic news, Australia’s seasonally adjusted unemployment rate rose to 5.9% in February. Also, the nation’s NAB business confidence index dropped in February, while the NAB business conditions index eased in the same month. On the contrary, the nation’s Westpac consumer confidence index inched higher in March and consumer inflation expectations advanced in the same month. During the previous week, the pair traded at a high of 0.7719 and a low of 0.7534. The pair is expected to find support at 0.7586, and a fall through could take it to the next support level of 0.7467. The pair is expected to find its first resistance at 0.7771, and a rise through could take it to the next resistance level of 0.7837. This week, the Reserve Bank of Australia’s (RBA) March meeting minutes, along with Australia’s house price index for 4Q and the Westpac leading index for February, will garner significant amount of market attention.
Gold
During the previous week, gold traded 2.04% higher and ended at USD1229.26 per ounce, as the US Dollar tumbled after the Federal Reserve signaled a cautious stance over the path of interest rate hike this year. The precious metal traded at a high of USD1234.00 per ounce and a low of USD1196.80 per ounce in the previous week. Immediate downside, the first support level is seen at USD1205.80 per ounce, followed by USD1182.70 per ounce, while on the upside, the first resistance level situated in USD1243.00 per ounce, followed by USD1257.10 per ounce.
Crude Oil
Last week, crude oil traded 0.6% higher and ended at USD48.78 per barrel, after the Energy Information Administration (EIA) showed that US crude oil inventories surprisingly fell 0.24 million barrels to 528.20 million barrels in the week ended 10 March, recording its first decline in 10 weeks, while the American Petroleum Institute (API) indicated that US crude stockpiles unexpectedly fell 0.53 million barrels to 526.3 million barrels in the last week. However, gains in oil prices were capped, after the EIA forecasted that US shale producers will likely raise oil output by 109,000 barrels a day in April. Moreover, the Organization of Petroleum Exporting Countries (OPEC), in its latest monthly report, indicated a rise in global crude stocks and a surprise output increase from its biggest member, Saudi Arabia. Crude oil witnessed a high of USD49.62 per barrel and a low of USD47.09 per barrel last week. Immediate downside, the first support level is seen at USD47.33 per barrel, followed by USD45.95 per barrel, while on the upside, the first resistance level situated in USD49.86 per barrel, followed by USD51.01 per barrel.
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