The highlights of the week were the US Federal Reserve’s (Fed) and the Bank of Japan’s (BoJ) monetary policy meetings as well as the British Prime Minister, Theresa May’s Brexit speech.
The greenback gained ground against its major counterparts, after the US Fed caught investors off-guard by projecting another interest rate hike before the year-end. The Fed, as widely expected, opted to leave the key interest rate unchanged between 1.00% and 1.25% and announced that it will begin to unwind its $4.5 trillion balance sheet next month. Further, fresh economic projections showed that officials expect the US economy to grow 2.4% this year, faster than a projection of 2.2% made in June.
Macroeconomic data showed that manufacturing activity in the US jumped to a 2-month high in September, whereas services sector growth cooled to a 2-month low in the same month. Further, the nation’s housing starts surprisingly eased for the second straight month in August, amid a sharp decrease in multi-family construction, while the NAHB housing market index unexpectedly fell in September. Also, the nation’s existing home sales dipped to a 12-month low in August. In other economic news, building permits in the US unexpectedly notched its highest level in 7 months in August. Moreover, the nation’s initial jobless claims surprisingly fell in the week ended 16 September.
The Pound ended the week on a weaker footing, after the British Prime Minister, Theresa May, proposed a two-year transitional phase after its planned exit from the European Union (EU) in 2019, during which the UK would continue to have unfettered access to the EU’s single market. May also indicated that Britain would continue to pay into the EU budget until 2020. In economic news, UK’s retail sales surged to a 4-month high in August, suggesting that consumer spending is likely to remain on solid ground to allow the Bank of England to hike interest rates in the near future.
The Euro ended the week a tad higher against the USD, after the Eurozone’s manufacturing sector activity accelerated to a nearly 7-year high in September, while growth in the region’s services sector notched a 4-month high in the same month, highlighting that economic recovery across the common currency region retained its momentum at the end of the third quarter. Moreover, the region’s ZEW investor morale climbed in September, while CB consumer confidence unexpectedly jumped to its highest since April 2001 in the same month, as strong economic fundamentals across the region continues to lighten consumer as well as investor sentiment.
EURUSD
The EUR traded slightly higher against the USD last week, with the pair closing at 1.1951. Data showed that the Eurozone’s flash Markit manufacturing PMI surprisingly advanced in September, while the preliminary services PMI rose more-than-anticipated in the same month. Also, the region’s ZEW economic sentiment index slightly climbed in September, while the flash consumer confidence index unexpectedly improved in the same month. Furthermore, the region’s final consumer price index (CPI) increased as initially estimated in August, whereas construction output rose on a monthly basis in July. Separately, Germany’s Markit manufacturing PMI unexpectedly climbed in September, whereas the services PMI expanded above market expectations in the same month. Also, the nation’s ZEW economic sentiment index climbed more-than-anticipated in September and the current situation index surprised to the upside in the same month. During the previous week, the pair hit at a high of 1.2033 and a low of 1.1862. The pair is expected to find support at 1.1864, and a fall through could take it to the next support level of 1.1777. The pair is expected to find its first resistance at 1.2035, and a rise through could take it to the next resistance level of 1.2119. This week, investors will focus on a speech by the European Central Bank (ECB) Chief, Mario Draghi along with the flash consumer price inflation data across the Eurozone. Additionally, Germany’s unemployment rate, the Ifo expectations as well as business climate indices, retail sales and the GfK consumer confidence index, all due to release this week, would garner significant amount of market attention.
GBPUSD
The GBP traded 0.66% lower against the USD last week, with the pair closing at 1.3504, after the British Prime Minister, Theresa May offered scant details on how UK might secure proper access to the EU’s single market post Brexit. Additionally, the BoE Governor, Mark Carney’s warning that any future interest rate hikes would be limited and gradual dented investor sentiment. Carney cautioned that economic consequences of Brexit are yet to be felt and would likely slowdown the British economic growth and push inflation up. On the economic front, data showed that UK’s retail sales jumped more-than-expected in August, while the nation’s public-sector net borrowing posted a less-than-expected deficit in the same month. In contrast, the nation’s Rightmove house price index eased on a monthly basis in September. During the previous week, the pair traded at a high of 1.3657 and a low of 1.3451. The pair is expected to find support at 1.3414, and a fall through could take it to the next support level of 1.3330. The pair is expected to find its first resistance at 1.3620, and a rise through could take it to the next resistance level of 1.3742. Looking ahead, traders will closely monitor a speech by the BoE Governor, along with UK’s final GDP numbers, GfK consumer confidence index, BBA mortgage approvals, Nationwide house prices and net consumer credit data, all scheduled to release this week.
USDJPY
During the previous week, the USD traded 1.05% higher against the JPY and ended at 111.99. Last week, the Bank of Japan (BoJ), in a widely anticipated move, left the key interest rate steady at -0.1% and pledged to continue its asset-buying program. Further, the central bank held its optimistic view of the economy, signaling its confidence that a solid recovery will eventually push inflation towards its 2.0% target. On the macro front, Japan’s adjusted merchandise trade surplus expanded less-than-anticipated in August. Further, the nation’s exports surged on an annual basis in August, while annual imports rose more-than-expected in the same month. On the other hand, the nation’s all industry activity index dropped in July, meeting market expectations. During the previous week, the pair traded at a high of 112.72 and a low of 111.12. The pair is expected to find support at 111.17, and a fall through could take it to the next support level of 110.34. The pair is expected to find its first resistance at 112.77, and a rise through could take it to the next resistance level of 113.54. Moving ahead, market participants will look forward to Japan’s inflation data, jobless rate, flash Nikkei manufacturing PMI and the small business optimism index, all set to release this week.
USDCHF
The USD traded 0.94% higher against the CHF last week, with the pair closing at 0.9693. In economic news, data indicated that Switzerland’s trade surplus narrowed in August, as imports grew faster than exports. Meanwhile, the State Secretariat for Economic Affairs (SECO) slashed Switzerland’s 2017 economic growth forecast to 0.9%, down from 1.4% projected earlier. The USD hit a high of 0.9748 and a low of 0.9581 against the CHF in the previous week. Immediate downside, the first support level is seen at 0.9601, followed by 0.9507, while on the upside, the first resistance level situated in 0.9768, followed by 0.9841. Ahead in the week, investors would keep a close watch on Switzerland’s ZEW expectations index, UBS consumption indicator and KOF leading indicator data.
USDCAD
The USD traded 1.16% higher against the CAD last week, with the pair closing at 1.2339. The Canadian Dollar declined against the USD, after the Bank of Canada’s (BoC) Deputy Governor, Timothy Lane, stated that the central bank, which has raised rates twice in three months, will closely monitor the currency’s impact on the economy and how the economy responds to higher interest rates to decide on future path of monetary policy. The Canadian Dollar extended losses, after Canada’s CPI advanced less-than-anticipated on an annual basis in August. On the contrary, the nation’s retail sales grew faster-than-expected on a monthly basis in July. The pair traded at a high of 1.2390 and a low of 1.2172 during the previous week. The pair is expected to witness its first support at 1.2211 and second support at 1.2082, while the first resistance is expected at 1.2429 and second resistance at 1.2518. This week, a speech by the BoC Governor, Stephen Poloz as well as the release of Canada’s GDP report, would gather a lot of market attention.
AUDUSD
During the previous week, the AUD traded 0.5% lower against the USD and ended at 0.7962, after the Reserve Bank of Australia’s (RBA) Governor, Philip Lowe, expressed little desire for an imminent interest rate hike. Lowe stated that the Australian economy is improving but rising global interest rates have no automatic implications for Australia and added that the central bank is in no rush to raise interest rates in the near-term. Meanwhile, minutes of the RBA’s September meeting showed that even though policymakers retained their optimistic view on the nation’s economic outlook, they expressed concerns about rising household debt and a strong local currency. On the data front, Australia’s Westpac leading index retreated on a monthly basis in August. The AUD hit a high of 0.8102 and a low of 0.7908 against the USD in the previous week. The pair is expected to find its first support at 0.7879 and first resistance at 0.8073. The second support is expected at 0.7796 and second resistance at 0.8184. Looking ahead, traders will eye Australia’s private sector credit data, scheduled to release later this week.
Gold
Gold traded 1.73% lower during the previous week, closing at USD1297.30 per ounce, amid a broad strength in the greenback, after the US Fed left the door open for another interest rate hike in December. The yellow metal witnessed a high of USD1323.40 per ounce and a low of USD1291.20 per ounce in the previous week. Immediate downside, the first support level is seen at USD1286.67 per ounce, followed by USD1272.83 per ounce, while on the upside, the first resistance level situated in USD1318.87 per ounce, followed by USD1337.23 per ounce.
Crude Oil
Last week, crude oil traded 1.54% higher and ended at USD50.66 per barrel, after the Organization of the Petroleum Exporting Countries (OPEC) stated that compliance to production cuts has reached record-high level and noted that major oil producers would wait until at least January 2018 to consider prolonging the output limits beyond March 2018. However, gains in crude prices were limited, after the Energy Information Administration (EIA) reported that US crude oil stockpiles climbed more-than-expected by 4.6 million barrels to 472.8 million barrels during the week ended 15 September, while the American Petroleum Institute (API) indicated that US crude oil inventories rose by 1.4 million barrels to 470.3 million barrels in the same week. Crude oil witnessed a high of USD51.11 per barrel and a low of USD49.68 per barrel last week. The commodity is expected to find its first support at USD49.86 per barrel and first resistance at USD51.29 per barrel. The second support is expected at USD49.05 per barrel and second resistance at USD51.91 per barrel.
Good trades, Traders.♟
