The highlights of the week were the European Central Bank’s (ECB) monetary policy meeting, agreement over the US debt limit and the surprising resignation of the Federal Reserve (Fed) Vice Chairman.
The greenback declined against its key counterparts last week, after the Fed Vice Chair, Stanley Fischer, stunned investors by announcing his resignation months before his term was due to end. However, losses in the greenback were limited, after the US President, Donald Trump and Congress Democrats reached a deal to raise the debt ceiling and extend government funding for around three months. Meanwhile, the US Fed Governor, Lael Brainard, advocated for patience on further interest rate hikes until inflation nears the central bank’s target.
Macroeconomic data revealed that the number of Americans filing for fresh jobless claims sharply advanced in the week ended 02 September, hitting its highest level in more than 2 years. Additionally, the nation’s final durable goods orders dropped as initially estimated in July, while factory orders plunged by the most in nearly 3 years in July. Meanwhile, the nation’s ISM non-manufacturing activity advanced at a softer pace in August. Meanwhile, the Fed’s Beige Book report showed that the US economic activity expanded at a modest to moderate pace in July through mid-August and highlighted concerns among business contacts about a prolonged slowdown in the auto industry.
The Euro gained ground against the USD last week, after the ECB President, Mario Draghi, signaled that the bank could unveil plans to pare back its quantitative easing program in October. The central bank left its ultra-loose monetary policy unchanged and made no changes to its quantitative easing program. Further, the governing council raised the Eurozone’s economic growth forecast to 2.2% in 2017, from a previous forecast of 1.9%, given the region’s improving fundamentals. However, the central bank lowered its inflation projections for 2018 to 1.2% from 1.3% estimated in June.
The Pound ended the week higher against the USD, after Britain’s manufacturing production rebounded for the first time in 7 months in July, while industrial production grew as expected in the same month. In contrast, the nation’s construction output deteriorated to a 3-month low in July. Also, the nation’s construction sector activity unexpectedly eased to 1-year low in August, pressured by an investment slump in the commercial sector, while activity in services sector declined to an 11-month low in the same month, suggesting that the nation’s economic activity, which initially withstood the shock of the Brexit vote, is losing traction.
EURUSD
Last week, the EUR traded 1.48% higher against the USD and closed at 1.2036, after the ECB Chief, hinted that the central bank could announce changes to its bond-buying program as early as next month. The ECB opted to leave the key interest rate unchanged at 0.00%. On the macro front, the Eurozone’s seasonally adjusted final gross domestic product (GDP) rose on a quarterly basis in 2Q 2017, in line with preliminary figures. Moreover, the region’s Sentix investor confidence index surprisingly advanced in September. On the other hand, the region’s final Markit services PMI fell more than initially estimated in August, while seasonally adjusted retail sales retreated in July, meeting market expectations. Separately, growth in Germany’s Markit services PMI was revised higher in August. In contrast, the nation’s seasonally adjusted factory orders unexpectedly dropped in July, while seasonally adjusted industrial production remained flat in the same month. The EUR hit a high of 1.2092 and a low of 1.1868 against the USD in the previous week. Immediate downside, the first support level is seen at 1.1905, followed by 1.1775, while on the upside, the first resistance level situated in 1.2129, followed by 1.2223. This week, investors will eye the Eurozone’s industrial production and trade balance figures along with Germany’s final inflation data.
GBPUSD
The GBP advanced against the USD last week, closing 1.92% higher at 1.3200, following a string of upbeat economic data from the UK. Data revealed that Britain’s manufacturing production rebounded more-than-expected on a monthly basis in July, while the nation’s industrial production climbed as expected in the same month. Also, the nation’s total trade deficit surprisingly dropped in July, while the nation’s Halifax house price index climbed more-than-expected in August. Further, NIESR estimated that UK’s GDP climbed 0.4% in the three months ended August. On the other hand, the nation’s Markit services PMI declined more-than-expected in August, while Markit construction PMI unexpectedly eased in the same month. Moreover, the nation’s construction output fell in July. The GBP hit a high of 1.3224 and a low of 1.2909 against the USD in the previous week. The pair is expected to witness its first support at 1.2997 and second support at 1.2795, while the first resistance is expected at 1.3312 and second resistance at 1.3425. Moving ahead, traders will closely monitor the Bank of England’s interest rate decision as well as the release of Britain’s inflation, house price index and ILO unemployment rate data, all scheduled this week.
USDJPY
During the previous week, the USD traded 2.19% lower against the JPY and ended at 107.84. Overnight data indicated that Japan’s final GDP grew less than initially estimated by 0.6% on a quarterly basis in 2Q 2017. Also, the nation’s (BOP basis) trade surplus unexpectedly expanded in July. On the contrary, the nation’s Nikkei services PMI dropped in August. In other economic news, Japan’s Eco-Watchers survey for current situation remained unchanged in August, while the survey for future outlook surprisingly advanced in the same month. During the previous week, the pair traded at a high of 109.93 and a low of 107.32. The pair is expected to witness its first support at 106.80 and second support at 105.75, while the first resistance is expected at 109.41 and second resistance at 110.97. Moving ahead, market participants will look forward to Japan’s machine orders, tertiary industry index, machine tool orders and final industrial production data, all slated to release this week.
USDCHF
During the previous week, the USD traded 2.14% lower against the CHF and ended at 0.9442. The Swiss Franc gained ground against the USD, as heightened tensions between North Korea and the US stoked demand for safe-haven currency. On the economic front, Switzerland’s seasonally adjusted GDP rose less-than-expected by 0.3% on a quarterly basis in 2Q 2017. Moreover, the nation’s consumer price index (CPI) remained flat on a monthly basis in August. Additionally, the nation’s seasonally adjusted unemployment rate remained unchanged at 3.2% in August, meeting market expectations. The USD hit a high of 0.9618 and a low of 0.9421 against the CHF in the previous week. Immediate downside, the first support level is seen at 0.9370, followed by 0.9297, while on the upside, the first resistance level situated in 0.9567, followed by 0.9691. Ahead in the week, the Swiss National Bank’s (SNB) interest rate decision, will keep investors on their toes.
USDCAD
The USD traded 1.9% lower against the CAD last week, with the pair closing at 1.2159. The Canadian Dollar advanced against the USD, after the Bank of Canada (BoC) surprised investors with its second interest rate rise within two months. The BoC, at its latest monetary policy meeting, raised its benchmark interest rate from 0.75% to 1.00%, citing robust economic growth in Canada. However, the BoC indicated that its appetite for further tightening may be curbed by a rising domestic currency and sluggish price pressures. On the data front, Canada’s unemployment rate unexpectedly fell to 6.2% in August, while building permits registered a drop on a monthly basis in July. On the other hand, the nation’s seasonally adjusted Ivey PMI eased in August, while the nation’s international merchandise trade deficit fell more-than-expected in July. The pair traded at a high of 1.2426 and a low of 1.2062 during the previous week. Immediate downside, the first support level is seen at 1.2005, followed by 1.1851, while on the upside, the first resistance level situated in 1.2369, followed by 1.2579. Going forward, Canada’s housing starts, new house price index and existing home sales data, all set to release this week, would garner a lot of market attention.
AUDUSD
The AUD traded 1.07% higher against the USD last week, with the pair closing at 0.8060. Last week, the Reserve Bank of Australia (RBA), at its latest monetary policy meeting, maintained its benchmark interest rate steady at a record low of 1.50%, as widely expected. In economic news, data revealed that Australia’s AiG performance of services index eased in August, while the AiG performance of construction index dropped in the same month. Further, the nation’s seasonally adjusted trade surplus surprisingly narrowed in July, while the seasonally adjusted current account deficit widened more-than-anticipated in 2Q 2017. Moreover, the nation’s seasonally adjusted retail sales surprisingly remained flat on a monthly basis in July. On the other hand, the nation’s seasonally adjusted GDP advanced less-than-expected by 0.8% QoQ in 2Q 2017. The pair traded at a high of 0.8125 and a low of 0.7942 during the previous week. The pair is expected to find its first support at 0.7959 and first resistance at 0.8142. The second support is expected at 0.7859 and second resistance at 0.8225. Going ahead, market participants will closely monitor Australia’s unemployment rate, NAB business confidence and Westpac consumer confidence data, due to release this week.
Gold
Gold rose last week, closing 1.61% higher at USD1346.59 per ounce, amid a broad weakness in the greenback and as geopolitical tensions surrounding North Korea’s nuclear and missile program continued to boost safe haven appeal of the precious yellow metal. The precious metal traded at a high of USD1362.40 per ounce and a low of USD1331.10 per ounce in the previous week. The precious metal is expected to find its first support at USD1333.93 per ounce and first resistance at USD1365.23 per ounce. The second support is expected at USD1316.87 per ounce and second resistance at USD1379.47 per ounce.
Crude Oil
Last week, crude oil strengthened 0.4% to close at USD47.48 per barrel, as concerns over mounting US crude inventories ebbed after the refineries, which were destroyed by the Hurricane Harvey, gradually restarted. However, gains in crude prices were capped, after the Energy Information Administration (EIA) showed that US crude oil stockpiles advanced by 4.6 million barrels to 462.4 million barrels in the week ended 01 September. Moreover, the American Petroleum Institute (API) reported a build of 2.8 million barrels in the US crude oil inventories in the same week. The commodity hit a high of USD49.42 per barrel and a low of USD47.15 per barrel in the previous week. Crude oil is expected to witness its first support at USD46.67 per barrel and second support at USD45.77 per barrel, while the first resistance is expected at USD48.94 per barrel and second resistance at USD50.31 per barrel.
Good trades Traders.∑
