The highlights of the week were the Bank of England’s (BoE) monetary policy decision, comments from the European Central Bank (ECB) President, Mario Draghi and lackluster economic data from the US.
The US Dollar ended the week higher against a basket of major currencies. Macroeconomic data indicated that retail sales in the US grew weaker than expected in April, while annual inflation came in softer-than-anticipated in the same month, thus raising fresh concerns over the health of the nation’s retail sector and the broader economy. Moreover, the nation posted a more-than-expected budget surplus in April and the number of Americans filing for fresh jobless claims unexpectedly dropped in the week ended 06 May 2017, thus pointing to a tightening labor market. Separately, the Philadelphia Federal Reserve (Fed) President, Patrick Harker, called for an additional two interest rate hikes this year.
The Pound ended the week lower against the USD, pressured by concerns of an economic slowdown after the Bank of England (BOE) revised down UK’s 2017 growth forecast. The BoE, at its latest monetary policy meeting, maintained the benchmark interest rate steady at a record low level of 0.25%, with one member, Kristin Forbes again voting against the other 7 members and calling for an immediate rate hike. In its quarterly economic outlook report, the BoE lowered its growth forecast for this year to 1.9% from 2.0%, but slightly raised for the following two years. Moreover, the bank revised up its inflation forecast, now expecting it to peak just below 3.0% in the last quarter of 2017.
On the data front, Britain’s industrial as well as manufacturing production, both dropped for the third consecutive month in March. Also, the nation’s construction output unexpectedly eased in March, while total trade deficit widened more-than-expected in the same month. Further, NIESR estimated that UK’s gross domestic product (GDP) advanced 0.2% in the three months to April 2017.
The Euro ended the week on a weaker footing against the USD, after the ECB President, Mario Draghi, brushed off calls to scale back its stimulus program, reiterating that underlying inflation continues to remain subdued and lack a convincing upward trend. Meanwhile, the European Commission (EU), in its quarterly economic forecasts report, slightly upgraded Eurozone’s economic growth forecast to 1.7% for 2017, from 1.6% estimated earlier in February. In other economic news, the Eurozone’s Sentix investor confidence index sharply improved in May, pushing the index to its highest level since July 2007, as worries over political populism across the Euro bloc ebbed.
EURUSD
The EUR traded 0.61% lower against the USD last week, with the pair closing at 1.0928, after the ECB President, Mario Draghi diminished calls for the central bank to trim its massive stimulus program sooner. On the data front, the Eurozone’s seasonally adjusted industrial production unexpectedly fell in March, whereas the Sentix investor confidence index rose more-than-expected in May. Separately, Germany’s preliminary gross domestic product (GDP) rose 0.6% on a quarterly basis in the first quarter of 2017, meeting market expectations. Moreover, the nation’s final consumer price index was confirmed at 2.0% on an annual basis in April. Further, the nation’s seasonally adjusted trade surplus widened more-than-expected in March, while seasonally adjusted factory orders grew in the same month. During the previous week, the pair traded at a high of 1.0997 and a low of 1.0839. The pair is expected to find support at 1.0848, and a fall through could take it to the next support level of 1.0764. The pair is expected to find its first resistance at 1.1006, and a rise through could take it to the next resistance level of 1.1080. This week, investors would focus on the ZEW economic sentiment index across the Eurozone along with the Eurozone’s flash GDP, final inflation figures, consumer confidence and trade balance data. Also, a speech by the ECB President, Mario Draghi, will be keenly watched by traders.
GBPUSD
The GBP traded 0.69% lower against the USD last week, with the pair closing at 1.2890, after the BoE trimmed Britain’s 2017 economic growth outlook. The BoE, at its latest monetary policy meeting, opted to keep its interest rates steady at a record low level of 0.25%. In other economic news, data revealed that UK’s industrial and manufacturing production dropped more-than-expected in March, while the nation’s construction output unexpectedly dipped in the same month. Moreover, NIESR estimated that UK’s gross domestic product (GDP) advanced 0.2% in the three months to April 2017. Also, the nation’s total trade deficit widened more-than-expected in March. During the previous week, the pair traded at a high of 1.2988 and a low of 1.2845. The pair is expected to find support at 1.2827, and a fall through could take it to the next support level of 1.2765. The pair is expected to find its first resistance at 1.2970, and a rise through could take it to the next resistance level of 1.3051. Looking ahead, investors anxiously await UK’s consumer price inflation, ILO unemployment rate and retail sales data, all scheduled to release this week.
USDJPY
The USD traded 0.55% higher against the JPY last week, with the pair closing at 113.33. Last week, a summary of opinions from the Bank of Japan’s (BoJ) April meeting showed that board members agreed on maintaining the central bank’s current accommodative policy due to downside risks from overseas. Further, policy members decided that as Japan’s exports and production were showing positive signs, it was appropriate to raise the nation’s economic assessment. In other economic news, data revealed that Japan’s Eco-Watchers survey for the current situation as well as the future outlook, both rose more-than-anticipated in April. Additionally, the nation’s (BOP basis) trade surplus narrowed less-than-expected in March. Moreover, the nation’s flash leading economic index advanced in March, in line with market expectations, while the flash coincident index dropped more-than-expected in the same month. During the previous week, the pair traded at a high of 114.37 and a low of 112.40. Immediate downside, the first support level is seen at 112.40, followed by 111.41, while on the upside, the first resistance level situated in 114.37, followed by 115.35. This week, market participants will closely monitor Japan’s 1Q GDP, industrial production and tertiary industry index data.
USDCHF
Last week, the USD traded 1.39% higher against the CHF and closed at 1.0005. On the economic front, Switzerland’s seasonally adjusted unemployment rate remained steady at 3.3% in April, meeting market expectation. Also, the nation’s consumer price index advanced in April, at par with market consensus. The USD hit a high of 1.0100 and a low of 0.9885 against the CHF in the previous week. The pair is expected to find its first support at 0.9896 and first resistance at 1.0111. The second support is expected at 0.9783 and second resistance at 1.0213. Moving ahead, investors will look forward to Switzerland’s producer and import prices, the sole economic release this week.
USDCAD
The USD traded 0.42% higher against the CAD last week, with the pair closing at 1.3708. On the macro front, Canada’s new housing price index registered a rise in March, in line with market expectations. On the contrary, the nation’s seasonally adjusted housing starts fell more-than-expected in April. Further, the nation’s building permits unexpectedly eased in March. During the previous week, the pair traded at a high of 1.3770 and a low of 1.3644. Immediate downside, the first support level is seen at 1.3646, followed by 1.3582, while on the upside, the first resistance level situated in 1.3772, followed by 1.3834. Going forward, Canada’s consumer price index and existing home sales data, would garner a lot of market attention.
AUDUSD
During the previous week, the AUD traded 0.44% lower against the USD and ended at 0.7385, on the back of disappointing retail sales and building approvals data in Australia. Australia’s seasonally adjusted retail sales unexpectedly dropped in March, whereas the nation’s seasonally adjusted building approvals deteriorated in the same month. On the other hand, the nation’s NAB business confidence index jumped in April, while the NAB business conditions index climbed in the same month. During the previous week, the pair traded at a high of 0.7425 and a low of 0.7329. The pair is expected to find its first support at 0.7336 and first resistance at 0.7432. The second support is expected at 0.7284 and second resistance at 0.7476. Moving ahead, minutes of the Reserve Bank of Australia’s (RBA) May meeting along with Australia’s unemployment rate and Westpac consumer confidence data, slated to release this week, will be on investors’ radar.
Gold
Gold rose last week, closing marginally higher at USD1228.43 per ounce. The yellow metal witnessed a high of USD1236.90 per ounce and a low of USD1214.30 per ounce in the previous week. The yellow metal is expected to witness its first support at USD1215.77 per ounce and second support at USD1203.73 per ounce, while the first resistance is expected at USD1238.37 per ounce and second resistance at USD1248.93 per ounce.
Crude Oil
Crude oil traded 3.5% higher in the previous week, closing at USD47.84 per barrel, as increasing support to continue OPEC-led production cuts beyond the middle of 2017 boosted gains in oil prices. Meanwhile, the Energy Information Administration (EIA) lifted its near-term outlook for US crude production to 9.31 million barrels a day in 2017, up 1.0% from the previous forecast. Crude prices added further gains, after the Energy Information Administration (EIA) indicated that US crude inventories fell more-than-anticipated by 5.2 million barrels to 522.5 million barrels in the week ended 05 May, recording its biggest weekly decline since December 2016, while the American Petroleum Institute (API) reported that US crude oil stockpiles fell sharply by 5.8 million barrels to 522.9 million barrels in the same week. Crude oil witnessed a high of USD48.22 per barrel and a low of USD45.53 per barrel last week. Crude oil is expected to its find support at USD46.16 per barrel, and a fall through could take it to the next support level of USD44.50 per barrel. The commodity is expected to find its first resistance at USD48.85 per barrel, and a rise through could take it to the next resistance level of USD49.88 per barrel.
Good trades Traders.
