Last week, the forex market was dictated by the stunning result of British snap election and the European Central Bank’s (ECB) monetary policy decision.
The Pound ended the week lower against the USD, after British Prime Minister, Theresa May’s massive gamble in calling a snap general election backfired as her Conservative party failed to maintain its majority in Parliament, creating new political uncertainties as the nation prepares to negotiate its exit from the European Union later this month. On the data front, UK’s dominant service sector slowed more than expected in May, while industrial as well as manufacturing production grew less-than-expected in April, suggesting that the economy made a lackluster start to the second quarter of 2017.
The Euro ended the week on a weaker footing against the USD, after the ECB trimmed its inflation forecasts for the next three years. The ECB, at its latest monetary policy meeting, stood pat on interest rate. Further, the central bank downgraded its expected 2017 inflation rate from 1.7% to 1.5%, while the forecast for 2018 and 2019 was reduced to 1.3% and 1.6% respectively. Nevertheless, the ECB slightly raised its growth projection for the next few years, citing stronger growth momentum in the region. Meanwhile, the Organization for Economic Co-operation and Development (OECD), in its latest economic outlook report, lifted the Eurozone’s growth forecast to 1.8% for 2017, boosted by strong growth in Germany.
The greenback ended the week mixed against its major peers. In economic news, the ISM non-manufacturing PMI showed that activity in the US service sector slowed more-than-expected in May, while the nation’s factory orders fell for the first time in 5 months in April. Moreover, the final Markit services PMI for May came in weaker than initially estimated. On the contrary, the nation’s initial jobless claims fell in the week ended 03 June, pointing to a tighter labor market despite a recent slowdown in jobs growth.
Separately, the OECD downgraded US growth forecast to 2.1% this year and 2.4% next year, down from its earlier prediction of 2.4% and 2.8% respectively, due to delay by the Trump administration to push through with its planned tax cuts and infrastructure spending. Meanwhile, it revised up its 2017 global growth forecast by 0.2%, now expecting global economy to expand at its fastest pace in 6 years of 3.5% this year, before accelerating by 3.6% in 2018.
EURUSD
The EUR traded 0.74% lower against the USD last week, with the pair closing at 1.1195, after the ECB announced a downward revision to its inflation forecasts for the next three years. The ECB, at its latest monetary policy meeting, held the benchmark interest rate steady at 0.00%, as widely expected. In economic news, the Eurozone’s seasonally adjusted final gross domestic product (GDP) was revised higher to 0.6% on a quarterly basis in the first quarter of 2017, while the region’s Sentix investor confidence index unexpectedly rose in June. Also, the region’s seasonally adjusted retail sales rose less-than-expected in April, while final services PMI was revised lower in May. Separately, Germany’s services activity remained steady in May, while seasonally adjusted trade surplus narrowed more-than-expected in April. The pair traded at a high of 1.1284 and a low of 1.1166 during the previous week. The pair is expected to find support at 1.1146, and a fall through could take it to the next support level of 1.1097. The pair is expected to find its first resistance at 1.1264, and a rise through could take it to the next resistance level of 1.1333. This week, market participants will focus on the ZEW survey of economic sentiment and final consumer price inflation data across the Eurozone along with the Eurozone’s industrial production data.
GBPUSD
Last week, the GBP traded 1.1% lower against the USD and closed at 1.2746, after the UK Prime Minister, Theresa May’s Conservative party lost majority in the House of Commons, creating an additional layer of uncertainty ahead of the Brexit negotiations. On the macro front, Britain’s industrial as well as manufacturing production rebounded less-than-expected in April, while the nation’s total trade deficit sharply narrowed in the same month. Meanwhile, NIESR estimated that UK’s gross domestic product (GDP) advanced 0.2% in the three months ended May 2017. On the other hand, the nation’s construction output unexpectedly declined in April and the nation’s Markit services PMI fell in May. The GBP hit a high of 1.2978 and a low of 1.2636 against the USD in the previous week. The pair is expected to find support at 1.2595, and a fall through could take it to the next support level of 1.2445. The pair is expected to find its first resistance at 1.2937, and a rise through could take it to the next resistance level of 1.3129. Looking ahead, traders will anxiously await the Bank of England’s (BoE) interest rate decision, due to be announced later in the week along with the UK’s consumer price inflation, ILO unemployment rate and retail sales data, all slated to release this week.
USDJPY
The USD declined against the JPY last week, closing 0.07% lower at 110.32. Last week, data showed that Japan’s economy expanded at a slower pace than initially estimated in the first three months of 2017, after the final gross domestic product (GDP) rose by 0.3%. Also, the nation’s (BOP basis) trade surplus narrowed less-than-expected in April. Further, the nation’s Eco-Watchers Survey for the current situation advanced in May, while the Eco-Watchers Survey for the future outlook unexpectedly climbed in the same month. Also, the nation’s tertiary industry index rebounded more-than-expected in April. Meanwhile, the OPEC estimated that Japan’s economy will expand 1.4% in 2017, up from 1.2% estimated earlier and 1.0% in 2018, revised higher from 0.8%. During the previous week, the pair traded at a high of 110.81 and a low of 109.12. The pair is expected to find support at 109.36, and a fall through could take it to the next support level of 108.39. The pair is expected to find its first resistance at 111.05, and a rise through could take it to the next resistance level of 111.77. Moving ahead, market participants look forward to the Bank of Japan’s (BoJ) interest rate decision coupled with Japan’s machine tool orders, machinery orders and final industrial production data, all due this week.
USDCHF
The USD traded 0.65% higher against the CHF last week, with the pair closing at 0.9694. On the macro front, Switzerland’s seasonally adjusted unemployment rate surprisingly remained steady at 3.2% in May. Moreover, the nation’s consumer price index rose more-than-anticipated by 0.2% in May. The pair traded at a high of 0.9728 and a low of 0.9614 during the previous week. Immediate downside, the first support level is seen at 0.9629, followed by 0.9565, while on the upside, the first resistance level situated in 0.9743, followed by 0.9793. Ahead in the week, traders will focus on the Swiss National Bank’s (SNB) interest rate decision.
USDCAD
The USD fell against the CAD last week, closing 0.13% lower at 1.3470. The Canadian Dollar gained ground, after data showed that the Canadian economy added jobs at a robust pace in May. However, the nation’s unemployment rate rose to 6.6% in May, meeting market expectations. Also, the nation’s building permits unexpectedly eased in April, while seasonally adjusted housing starts dropped more-than-expected in May. During the previous week, the pair traded at a high of 1.3540 and a low of 1.3423. The pair is expected to find support at 1.3415, and a fall through could take it to the next support level of 1.3361. The pair is expected to find its first resistance at 1.3532, and a rise through could take it to the next resistance level of 1.3595. Going forward, market participants will keep a close watch on Canada’s existing home sales data, the sole important release this week.
AUDUSD
The AUD strengthened against the USD last week, closing 1.13% higher at 0.7527, following upbeat Australian gross domestic product (GDP) numbers. Australia’s seasonally adjusted GDP expanded more-than-expected by 1.7% on an annual basis in 1Q 2017. Meanwhile, the Reserve Bank of Australia (RBA) left the official cash rate unchanged at a record low 1.50% for the tenth consecutive month, as widely expected, while noting that some economic indicators such as wages showed signs of lagging. In other economic news, the nation’s AiG performance of services index fell in May, while the AIG performance of construction index increased in the same month. During the previous week, the pair traded at a high of 0.7566 and a low of 0.7422. The pair is expected to find support at 0.7444, and a fall through could take it to the next support level of 0.7361. The pair is expected to find its first resistance at 0.7588, and a rise through could take it to the next resistance level of 0.7649. This week, investors will closely monitor Australia’s unemployment rate, the NAB business confidence as well as Westpac consumer confidence indices data.
Gold
Gold traded 0.97% lower during the previous week, closing at USD1266.76 per ounce, reversing its previous week’s gains. Last week, the precious metal traded at a high of USD1298.80 per ounce and a low of USD1266.70 per ounce. The yellow metal is expected to witness its first support at USD1257.40 per ounce and second support at USD1246.00 per ounce, while the first resistance is expected at USD1289.50 per ounce and second resistance at USD1310.20 per ounce.
Crude Oil
Last week, crude oil weakened 3.84% to close at USD45.83 per barrel, following an unexpected rise in the US crude oil stockpiles. The Energy Information Administration (EIA) reported that US crude oil inventories surprisingly rose by 3.3 million barrels to 513.2 million barrels in the week ended 02 June, while the American Petroleum Institute (API) indicated that US crude oil stockpiles dropped by 4.62 million barrels to 508.6 million barrels in the same week. Meanwhile, the EIA trimmed its global oil demand forecast for 2017 by 20,000 barrels per day (bpd) to 1.54 million bpd. Crude oil hit a high of USD48.42 per barrel and a low of USD45.20 per barrel in the previous week. Crude oil is expected to its find support at USD44.59 per barrel, and a fall through could take it to the next support level of USD43.29 per barrel. The commodity is expected to find its first resistance at USD47.81 per barrel, and a rise through could take it to the next resistance level of USD49.73 per barrel.
Good trades Traders.
