Last week, the forex market was dictated by the FOMC minutes, dovish comments from the European Central Bank (ECB) Chief, Mario Draghi and gross domestic product (GDP) data in the US, UK and Germany.
The greenback ended the week higher against a basket of major currencies, after the latest FOMC minutes indicated that policymakers could raise interest rates “soon” and supported the plan to gradually scale back the Federal Reserve’s (Fed) $4.5 trillion balance sheet. Meanwhile, the San Francisco Fed President, John Williams, reiterated his view that the Fed is likely to raise interest rates a total of three times this year.
On the macro front, the second estimate of US annualized GDP was revised up sharply to 1.2% on a quarterly basis in the first quarter of 2017. However, it was the weakest performance since the first quarter of 2016. Meanwhile, the nation’s services sector accelerated at its fastest pace in 4 months in May, whereas activity in manufacturing sector surprisingly dipped to an 8-month low level in the same month. On the other hand, the nation’s flash durable goods orders eased for the first time in 5 months in April. Also, sales of newly constructed homes as well as existing homes fell more-than-expected in April. Further, the number of Americans filing for fresh jobless claims slightly rose in the week ended 20 May. Additionally, the nation’s advance goods trade deficit surprisingly widened in April.
The Pound ended the week on a weaker footing against the USD, after data revealed that UK’s economy slowed more-than-expected in 1Q 2017, as rising inflation hit consumer spending. Britain’s economic momentum is widely expected to slow this year as the nation’s traditionally resilient consumers begin to feel the pinch from higher inflation after the Brexit vote.
The Euro ended the week on a weaker footing, after the ECB President reaffirmed his view that the Eurozone’s economy still needs support of the central bank’s expansive monetary stimulus to durably stabilize inflation around 2.0%, despite strong recovery in the region’s economic growth. In economic news, the manufacturing PMI across the Eurozone surprisingly advanced to its highest level in 6 years in May, driven by domestic and international demand, while services PMI unexpectedly slid in the same month. Moreover, the German economy expanded as estimated in 1Q 2017, benefitting from higher demand at home and abroad. In other economic news, the nation’s Ifo business climate recorded a higher-than-estimated rise in May, notching its highest level since 1991.
EURUSD
During the previous week, the EUR traded 0.19% lower against the USD and ended at 1.1183, after the ECB President, Mario Draghi, showed no signs of paring the ECB’s extraordinary stimulus program. On the data front, the manufacturing PMI surprisingly advanced in May across the Eurozone, while services PMI unexpectedly slid in the same month. Meanwhile, in German, the power house economy of the Eurozone, the seasonally adjusted final GDP advanced as expected in 1Q 2017. Moreover, the nation’s GfK consumer confidence index surprisingly advanced in June. In other economic news, the nation’s Ifo business climate recorded a higher-than-estimated rise in May. Moreover, the German Ifo current assessment and business expectations indices registered an increase in the same month. Separately, the Bundesbank in its monthly report stated that Germany's growth will continue throughout the spring, helped by strong demand for industrial goods and high construction activity. The EUR hit a high of 1.1268 and a low of 1.1161 against the USD in the previous week. The pair is expected to witness its first support at 1.1140 and second support at 1.1097, while the first resistance is expected at 1.1247 and second resistance at 1.1311. This week, investors will focus on the manufacturing PMI data across the Eurozone along with the flash consumer price index and unemployment rate to gauge the strength in the European economy. Additionally, Germany’s retail sales, CPI and unemployment rate will also be keenly watched by investors.
GBPUSD
The GBP declined against the USD last week, closing 1.76% lower at 1.2804, after data revealed that UK’s second estimate of gross domestic product (GDP) slowed more-than-expected on a quarterly basis in 1Q 2017, as rising prices in the wake of the Brexit vote took their toll on consumer spending. Moreover, the nation’s public sector net borrowing posted a higher-than-anticipated deficit in April. The pair traded at a high of 1.3034 and a low of 1.2776 during the previous week. The pair is expected to find its first support at 1.2709 and first resistance at 1.2967. The second support is expected at 1.2613 and second resistance at 1.3129. Looking ahead, investors will anxiously await Britain’s manufacturing PMI, consumer credit, mortgage approvals and Nationwide housing prices data.
USDJPY
Last week, the USD traded 0.06% higher against the JPY and closed at 111.33. Data indicated that Japan’s national consumer price inflation advanced as expected on a yearly basis in April, driven largely by higher energy price. Meanwhile, the nation’s Nikkei manufacturing PMI advanced at a slower pace in May, recording its lowest level in 6 months. Moreover, the all industry activity index fell more-than-anticipated in March. In other economic news, the nation’s coincident index recorded a drop in March, while the leading economic index registered a rise in the same month. Meanwhile, the BoJ Governor, Haruhiko Kuroda, indicated that uncertainty about the interest rate is making it difficult for policymakers to steer policy. He further stated that the rate of interest has been falling globally, which has led central banks to adopt unconventional economic policies. The USD hit a high of 112.13 and a low of 110.88 against the JPY in the previous week. The pair is expected to find support at 110.76, and a fall through could take it to the next support level of 110.20. The pair is expected to find its first resistance at 112.01, and a rise through could take it to the next resistance level of 112.70. Moving ahead, market participants will look forward to unemployment rate, retail trade, industrial production and manufacturing PMI for further direction.
USDCHF
The USD traded 0.2% higher against the CHF last week, with the pair closing at 0.9741. On the data front, Switzerland’s trade surplus narrowed more-than-expected in April. Meanwhile, the nation’s imports recorded a rise in April and exports declined in the same month. Moreover, Switzerland’s industrial production declined on a yearly as well as quarterly basis in 1Q 2017. The USD hit a high of 0.9777 and a low of 0.9697 against the CHF in the previous week. Immediate downside, the first support level is seen at 0.9700, followed by 0.9658, while on the upside, the first resistance level situated in 0.9780, followed by 0.9818. Moving ahead, investors will look forward to Switzerland’s gross domestic product, KOF leading indicator and retail sales data.
USDCAD
Last week, the USD traded 0.49% lower against the CAD and closed at 1.3446. The Bank of Canada (BoC) maintained the key interest rate unchanged at 0.5%. Although the BoC Governor, Stephen Poloz stated that the economic data is improving, he once again highlighted Canada’s weak wage growth and the slowing pace of underlying inflation, suggesting that the economy still has room for improvement. On the data front, Canada’s wholesale sales advanced higher-than-anticipated on a monthly basis in March. The pair traded at a high of 1.3540 and a low of 1.3388 during the previous week. Immediate downside, the first support level is seen at 1.3376, followed by 1.3306, while on the upside, the first resistance level situated in 1.3528, followed by 1.3610. Going forward, Canada’s gross domestic product and current account data along with manufacturing PMI, would garner lot of market attention.
AUDUSD
The AUD traded 0.15% lower against the USD last week, with the pair closing at 0.7448. In economic news, Australia’s Westpac leading index recorded a decline on a monthly basis in April, while construction work done fell more-than-expected in 1Q 2017. The AUD hit a high of 0.7517 and a low of 0.7422 against the USD in the previous week. The pair is expected to find support at 0.7408, and a fall through could take it to the next support level of 0.7367. The pair is expected to find its first resistance at 0.7503, and a rise through could take it to the next resistance level of 0.7557. Looking ahead, market participants will await the release of Australia’s gross domestic product, retail sales and HIA new home sales data.
Gold
Gold rose last week, closing 0.86% higher at USD1266.76 per ounce. However, gains in gold prices were limited, amid strength in the US Dollar. The yellow metal witnessed a high of USD1272.70 per ounce and a low of USD1250.90 per ounce in the previous week. The precious metal is expected to find its first support at USD1256.43 per ounce and first resistance at USD1278.23 per ounce. The second support is expected at USD1242.77 per ounce and second resistance at USD1286.37 per ounce.
Crude Oil
Crude oil weakened in the previous week, closing 1.05% lower at USD49.80 per barrel, as investors were disappointed by the decision of the OPEC and non-OPEC members to extend production cuts by 1.8 million barrels per day until the end of 1Q18, market participants expected more aggressive plan to whittle down a global supply glut. Weakness in oil prices were capped, after the Energy Information Administration (EIA) showed that US crude oil stocks fell by 4.4 million barrels in the week ended 19 May, while the American Petroleum Institute (API) reported that US oil inventories declined by 1.5 million barrels last week. Last week, the commodity traded at a high of USD52.00 per barrel and a low of USD48.18 per barrel. Immediate downside, the first support level is seen at USD48.03 per barrel, followed by USD46.20 per barrel, while on the upside, the first resistance level situated in USD51.85 per barrel, followed by USD53.84 per barrel.
Good trades Traders.☝
