The highlights of the week were the heightened geopolitical tensions between the US and North Korea as well as weak US inflation numbers and a mixed batch of data from the UK.
Last week, the greenback traded mixed against most of its key peers, after the US and North Korea engaged into verbal threats, with the US President, Donald Trump, warning North Korea that any threats to the US will be “met with fire and fury”. Meanwhile, the St. Louis Fed President, James Bullard, reiterated that low interest rates will be prudent over the near-term, as inflation is likely to remain at the current low levels even if the US job market continues to improve.
Data showed that consumer prices in the US grew softer-than-expected in July, pointing to scant inflationary pressures in the world’s largest economy, thus quelling hopes that the Federal Reserve (Fed) will raise interest rates again later this year. Further, the nation’s producer prices surprisingly fell in July, hitting its lowest level in 11 months. Also, the number of Americans filing for jobless claims for the first time unexpectedly rose in the week ended 05 August 2017.
Another set of data indicated that JOLTs job openings in the US surged to a record high in June, while the nation’s NFIB small business optimism index unexpectedly surged to a 5-month high in July, thus indicating that small business firms are feeling optimistic about the economy’s growth prospects. Meanwhile, the nation’s consumer credit grew less-than-expected in June.
The Pound ended the week on a weaker footing against the USD, after data indicated that Britain’s total trade deficit surprisingly widened to a 9-month high in June, as exports dipped and imports jumped. Further, the nation’s construction output surprised with an unexpected drop in June. Additionally, NIESR estimated that UK’s gross domestic product (GDP) rose less-than-anticipated in the three months to July. Moreover, the nation’s manufacturing production remained flat in June, meeting market expectations. On the contrary, the nation’s industrial production climbed above market expectations in June.
The Euro ended the week higher against the USD. On the macro front, investor sentiment in the Eurozone eased in August, pushing the Sentix investor confidence index to a 3-month low. Separately, industrial production in Germany disappointed in June, dipping for the first time in 6 months. Furthermore, the nation’s seasonally adjusted trade surplus widened to a 10-month high in June, as a fall in imports outstripped that of exports.
EURUSD
The EUR strengthened against the USD last week, closing 0.41% higher at 1.1821. On the macro front, the Eurozone’s Sentix investor confidence index dropped less-than-expected in August. Separately, Germany’s final consumer price index (CPI) climbed 1.7% on an annual basis in July, confirming the preliminary print. Further, the nation’s seasonally adjusted industrial production unexpectedly eased in June, while the nation’s seasonally adjusted trade surplus expanded more-than-anticipated in the same month. The EUR hit a high of 1.1847 and a low of 1.1689 against the USD in the previous week. Immediate downside, the first support level is seen at 1.1724, followed by 1.1628, while on the upside, the first resistance level situated in 1.1882, followed by 1.1944. This week, investors will focus on the flash 2Q GDP data across the Eurozone coupled with the region’s final CPI and industrial production data. Moreover, minutes of the European Central Bank’s latest meeting, slated to release later in the week, will be eyed by traders.
GBPUSD
The GBP declined against the USD last week, closing 0.2% lower at 1.3014, following dismal economic releases in the UK. Data indicated that Britain’s total trade deficit surprisingly widened in June and the nation’s construction output unexpectedly fell in the same month. Further, NIESR estimated that UK’s gross domestic product (GDP) climbed less-than-anticipated in the three months to July. Moreover, the nation’s manufacturing production remained flat in June, at par with market expectations, whereas the nation’s industrial production grew above expectations in June. In other economic news, UK’s seasonally adjusted Halifax house price index rebounded more-than-expected in July, while the nation’s BRC retail sales across all sectors advanced as expected in the same month. In contrast, the nation’s RICS house price balance unexpectedly fell in July. During the previous week, the pair traded at a high of 1.3059 and a low of 1.2940. The pair is expected to find its first support at 1.2950 and first resistance at 1.3069. The second support is expected at 1.2885 and second resistance at 1.3123. Moving ahead, investors will closely monitor UK’s inflation figures, retail sales and ILO unemployment rate data, all scheduled to release this week.
USDJPY
The USD declined against the JPY last week, closing 1.36% lower at 109.19. The Japanese Yen gained ground against the USD, amid increased risk aversion as investors were grappled with geopolitical tensions between the US and North Korea. On the macro front, Japan’s flash leading economic index advanced more-than-expected in June, while the nation’s flash coincident index increased as expected in the same month. Moreover, the nation posted a less-than-anticipated trade surplus (BOP basis) in June. On the other hand, the nation’s Eco-Watchers Survey for the current situation unexpectedly dropped in July, while the survey for the future outlook surprisingly eased in the same month. Other data revealed that Japan’s preliminary machine tool orders rose in July. In contrast, nation’s machinery orders unexpectedly eased in June. Meanwhile, the nation’s tertiary industry index remained flat in July. During the previous week, the pair traded at a high of 110.92 and a low of 108.74. The pair is expected to find support at 108.31, and a fall through could take it to the next support level of 107.44. The pair is expected to find its first resistance at 110.49, and a rise through could take it to the next resistance level of 111.80. Going ahead, market participants will keep a close watch on Japan’s 2Q GDP data, to gauge strength in the Japanese economy.
USDCHF
During the previous week, the USD traded 1.12% lower against the CHF and ended at 0.9618. The Swiss Franc surged against the USD, as heightened geopolitical fears surrounding North Korea and the US lured investors to the safe-haven appeal of the currency. On the data front, Switzerland’s CPI fell in July, in line with market expectations. Meanwhile, the nation’s seasonally adjusted unemployment rate remained steady at 3.2% in July, at par with market consensus. During the previous week, the pair traded at a high of 0.9773 and a low of 0.9584. The pair is expected to find support at 0.9544, and a fall through could take it to the next support level of 0.9470. The pair is expected to find its first resistance at 0.9733, and a rise through could take it to the next resistance level of 0.9848. Going ahead, investors’ will look forward to Switzerland’s producer and import prices data, scheduled later this week.
USDCAD
The USD traded 0.25% higher against the CAD last week, with the pair closing at 1.2677. Macroeconomic data indicated that Canada’s seasonally adjusted housing starts surprisingly advanced in July and the nation’s building permits unexpectedly climbed in June. Further, the nation’s new housing price index registered a less-than-expected rise in June. The USD hit a high of 1.2753 and a low of 1.2630 against the CAD in the previous week. The pair is expected to find support at 1.2620, and a fall through could take it to the next support level of 1.2564. The pair is expected to find its first resistance at 1.2743, and a rise through could take it to the next resistance level of 1.2810. Ahead in the week, Canada’s CPI and existing home sales data, will grab a lot of market attention.
AUDUSD
The AUD traded 0.35% lower against the USD last week, with the pair closing at 0.7894. Last week, the Reserve Bank of Australia (RBA) Governor, Philip Lowe, stated that the central bank had been prepared to be “patient” on monetary policy and acknowledged low wage growth as one of the key risks to the Australian economy. Further, he indicated that any move in interest rate will likely be gradual and probably to the upside. On the economic front, Australia’s AiG performance of construction index rose in July. Additionally, the nation’s NAB business conditions index rose in July, while the nation’s NAB business confidence index jumped in the same month. Meanwhile, the nation’s seasonally adjusted home loan approvals increased less-than-anticipated in June. On the contrary, the nation’s Westpac consumer confidence index fell in August, while the nation’s consumer inflation expectation declined in the same month. During the previous week, the pair traded at a high of 0.7949 and a low of 0.7839. The pair is expected to witness its first support at 0.7839 and second support at 0.7784, while the first resistance is expected at 0.7949 and second resistance at 0.8004. Going forward, the Reserve Bank of Australia’s August meeting minutes, followed by Australia’s unemployment rate, set to release this week, will be on investors’ radar.
Gold
Last week, gold rose 2.42% to close at USD1289.31 per ounce, as escalating geopolitical tension between the US and North Korea increased demand for the safe-haven yellow metal. Last week, the precious metal traded at a high of USD1298.10 per ounce and a low of USD1257.10 per ounce. Gold is expected to its find support at USD1268.70 per ounce, and a fall through could take it to the next support level of USD1242.40 per ounce. The yellow metal is expected to find its first resistance at USD1309.70 per ounce, and a rise through could take it to the next resistance level of USD1324.40 per ounce.
Crude Oil
Last week, crude oil weakened 1.53% to close at USD48.82 per barrel, after the Organization of the Petroleum Exporting Countries (OPEC) reported an increase in its July oil output by 173,000 barrels per day (bpd) to 32.87 million bpd, driven by higher production in Libya, Nigeria and Saudi Arabia. Meanwhile, OPEC raised its 2017 growth forecast for global oil demand by 100,000 bpd to 1.37 million bpd. Moreover, the International Energy Agency (IEA) revised up its 2017 global crude oil demand to 1.5 million bpd, up from a previous expectation of 1.4 million bpd. Losses in crude prices were capped, after the Energy Information Administration (EIA) reported that US crude oil stockpiles fell more-than-expected by 6.5 million barrels to 475.4 million barrels in the week ended 04 August, while the American Petroleum Institute (API) indicated that US crude oil inventories declined by 7.8 million barrels to 478.4 million in the week ended 04 August. Last week, the commodity traded at a high of USD50.22 per barrel and a low of USD47.98 per barrel. The commodity is expected to find its first support at USD47.77 per barrel and first resistance at USD50.01 per barrel. The second support is expected at USD46.76 per barrel and second resistance at USD51.24 per barrel.
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