Last week, the forex market was dictated by the monetary policy meetings of four major central banks.
The greenback ended the week on a weaker footing against its key counterparts, following downbeat economic data in the US that sparked fresh concerns over the health of the nation’s economy. Consumer prices in the US unexpectedly fell on a monthly basis in May, pointing towards easing inflationary pressures in the world’s largest economy. Additionally, the nation’s advance retail sales surprisingly posted its biggest decline in 16 months in May. Moreover, the nation’s flash Reuters/Michigan consumer sentiment index deteriorated in June, suggesting that consumers are less optimistic about the nation’s growth prospects amid ongoing political unrest in Washington. Moreover, the nation’s housing starts dipped to an 8-month low level in May, while building permits surprisingly eased in the same month. Moreover, the nation’s manufacturing production unexpectedly fell in May, whereas industrial production remained flat in the same month. In contrast, the nation’s initial jobless claims dropped more-than-anticipated in the week ended 10 June.
Separately, the US Fed raised the benchmark interest rate by a quarter percentage point to a target range of 1.00% to 1.25%, holding the view that growth prospects for the world’s largest economy are brighter and indicated plans to pare back its $4.5 trillion balance sheet this year. Further, the Fed Chair, Janet Yellen, stated that weak readings on inflation will prove transitory and added that the board will carry through on further rate hikes. Also, the central bank dropped its 2017 inflation projection to 1.6%, from 1.9% forecasted earlier. Meanwhile, the bank maintained its forecast of one more rate hike this year.
The GBP ended the week higher against the USD, after the Bank of England (BoE), catching investors off guard, voted 5-3 to keep key interest rate unchanged at 0.25%. Minutes of the meeting noted that soaring inflation pushed three committee members to vote for a rate hike. Additionally, policy makers now expect inflation could overshoot the 2.0% target. In other economic news, UK’s annual inflation surged to a 4-year high level in May, exerting further pressure on the BoE to try and limit spiking inflation. Also, the nation’s retail sales slid more-than-anticipated in May, intensifying concerns about the outlook for consumers.
The JPY ended the week in negative territory. Last week, the BoJ maintained its key interest rate steady at -0.10%, while noting signs of improvement in the nation’s private consumption and overseas growth.
EURUSD
The EUR traded slightly higher against the USD last week, with the pair closing at 1.1198. In economic news, the Eurozone’s ZEW economic sentiment index climbed in June, while the region’s final consumer price index (CPI) advanced 1.4% on an annual basis in May, in line with flash estimates. Moreover, the region’s seasonally adjusted industrial production rose in April, meeting market expectations. In contrast, the region’s seasonally adjusted trade surplus narrowed more-than-expected in April. Separately, Germany’s ZEW economic sentiment index surprisingly fell in June, whereas the final CPI climbed 1.5% on an annual basis in May, confirming the flash estimate. The EUR hit a high of 1.1296 and a low of 1.1132 against the USD in the previous week. Immediate downside, the first support level is seen at 1.1121, followed by 1.1045, while on the upside, the first resistance level situated in 1.1285, followed by 1.1373. This week, investors will focus on the flash Markit manufacturing and services PMIs across the Eurozone along with the Eurozone’s preliminary consumer confidence index and the ECB’s economic bulletin report.
GBPUSD
The GBP traded 0.29% higher against the USD last week, with the pair closing at 1.2783, after the BoE narrowly voted in favor of maintaining record low interest rates, suggesting a rate hike could be sooner-than-expected. On the data front, Britain’s CPI advanced more-than-expected by 2.9% on an annual basis in May. Additionally, the nation’s ILO unemployment rate remained steady at 4.6% in the three months ended April, meeting market expectations. However, the nation’s average earnings including bonus advanced less-than-expected on an annual basis in the February-April 2017 period. Meanwhile, the British Prime Minister, Theresa May, was seeking a deal with a small Northern Ireland’s Democratic Unionist Party (DUP) to overcome the problems of a hung parliament. Separately, Moody’s and S&P, warned that the unconvincing outcome of Britain’s snap election will possibly delay Brexit talks and may also result in credit rating downgrade. During the previous week, the pair traded at a high of 1.2818 and a low of 1.2639. Immediate downside, the first support level is seen at 1.2675, followed by 1.2568, while on the upside, the first resistance level situated in 1.2854, followed by 1.2926. Ahead in the week, investors will closely monitor a speech by the BoE Governor, Mark Carney coupled with UK’s public sector net borrowing data. Moreover, formal Brexit talks are also set to start this week.
USDJPY
The USD advanced against the JPY last week, closing 0.51% higher at 110.88. The Bank of Japan (BoJ), at its latest monetary policy meeting, maintained its key interest rate steady at -0.10%. In economic news, Japan’s final industrial production rebounded in April, confirming the flash estimate, while the nation’s flash machine tool orders rose in May. On the contrary, the nation’s machinery orders unexpectedly dropped in April and the BSI large manufacturing index fell in 2Q 2017. The pair traded at a high of 111.42 and a low of 108.83 during the previous week. Immediate downside, the first support level is seen at 109.33, followed by 107.79, while on the upside, the first resistance level situated in 111.92, followed by 112.97. Moving ahead, market participants will keep a close watch on BoJ’s latest meeting minutes and a speech by the BoJ’s Governor, Haruhiko Kuroda. Also, Japan’s flash Nikkei manufacturing PMI and adjusted merchandise trade balance data will garner market attention.
USDCHF
Last week, the USD traded 0.4% higher against the CHF and closed at 0.9733. The Swiss National Bank (SNB), at its latest monetary policy meeting, maintained the key interest rate steady at -0.75%, as widely expected, amid strength in the local currency and an absence of price pressures. In a post meeting statement, the SNB President, Thomas Jordan, stated that recent data indicated that the Swiss economy is on the recovery-path. Further, the central bank also reiterated that the Swiss Franc is still significantly overvalued and that it would remain active in the foreign exchange market as necessary. Separately, the central bank kept its 2017 inflation forecast steady at 0.3% but trimmed its 2018 outlook to 0.3%, down by 0.1% and lowered its 2019 forecast to 1.0% from 1.1%. The USD hit a high of 0.9771 and a low of 0.9641 against the CHF in the previous week. Immediate downside, the first support level is seen at 0.9659, followed by 0.9585, while on the upside, the first resistance level situated in 0.9789, followed by 0.9845. This week, traders will look forward to a speech by the SNB President along with Switzerland’s trade balance figures.
USDCAD
The USD fell against the CAD last week, closing 1.91% lower at 1.3213. The Canadian Dollar advanced, after hawkish comments by the Bank of Canada (BoC) Senior Deputy Governor, Carolyn Wilkins, that Canada’s first-quarter growth was “pretty impressive” and the central bank could consider whether current low rates would still be required, thus triggering hopes that the BoC could raise its benchmark interest rates for the first time in nearly seven years. Moreover, the BoC Governor, Stephen Poloz, stated that the central bank’s 2015 interest rate cuts “have largely done their work” and economic recovery from weak oil prices appeared to be broadening, indicating that an interest hike could be around the corner. Separately, macroeconomic data revealed that Canada’s existing home sales dropped in May. The pair traded at a high of 1.3470 and a low of 1.3165 during the previous week. The pair is expected to find support at 1.3095, and a fall through could take it to the next support level of 1.2978. The pair is expected to find its first resistance at 1.3400, and a rise through could take it to the next resistance level of 1.3588. Going forward, Canada’s inflation and retail sales data, slated to release this week, would be on investors’ radar.
AUDUSD
During the previous week, the AUD traded 1.25% higher against the USD and ended at 0.7621, following upbeat Australian employment report. Australia’s seasonally adjusted unemployment rate unexpectedly eased to 5.5% in May, as the number of people employed jumped in the same month. On the other hand, the nation’s consumer inflation expectations dropped in June. Moreover, the nation’s NAB business confidence index sharply dropped in May, while the business conditions index eased in the same month. Also, the nation’s Westpac consumer confidence index fell in June. The pair traded at a high of 0.7636 and a low of 0.7522 during the previous week. The pair is expected to witness its first support at 0.7550 and second support at 0.7479, while the first resistance is expected at 0.7664 and second resistance at 0.7707. Going ahead, market participants will keep a close watch on the RBA’s June meeting minutes, the sole important release this week.
Gold
Last week, gold fell 1.03% to close at USD1253.73 per ounce, after the US Fed offered an upbeat outlook of the US economy and indicated that it will continue to be on the path of gradual rate hikes. The yellow metal hit a high of USD1284.20 per ounce and a low of USD1252.70 per ounce in the previous week. Immediate downside, the first support level is seen at USD1243.87 per ounce, followed by USD1232.53 per ounce, while on the upside, the first resistance level situated in USD1275.37 per ounce, followed by USD1295.53 per ounce.
Crude Oil
Last week, crude oil weakened 2.38% to close at USD44.74 per barrel, after the Organization of the Petroleum Exporting Countries (OPEC), in its monthly report, stated that the group’s output increased by 336,000 barrels per day (bpd) in May to 32.14 million bpd, amid a rebound in Nigerian and Libyan oil output, which were exempted from supply cuts. Moreover, the International Energy Agency (IEA) report indicated that non-OPEC crude output would rise in 2018. Oil prices failed to find support, after the Energy Information Administration (EIA) showed that US crude oil inventories fell less-than-expected by 1.7 million barrels to 511.5 million barrels in the week ended 09 June, while the American Petroleum Institute (API) indicated that US crude oil stockpiles surprisingly rose by 2.8 million barrels to 511.4 million barrels in the same week. The commodity hit a high of USD46.71 per barrel and a low of USD44.22 per barrel in the previous week. Crude oil is expected to witness its first support at USD43.70 per barrel and second support at USD42.71 per barrel, while the first resistance is expected at USD46.19 per barrel and second resistance at USD47.69 per barrel.
Good trades Traders.
