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Weekly Market Watch - Monday, 30 August 2010
Subscribe to our weekly "Market Watch" newsletter. Last Week RecapEUR/USD traded in a limited range last week, starting the week on a soft note as German Flash Manufacturing PMI came out at 58.2 — versus a consensus of 60.9 — while German Flash Services PMI came out slightly better than expected at 58.5 against an expected number of 56.3, with the previous number revised downward from 57.3 to 56.5. Also, Eurozone Flash Services PMI came out at 55.6 — in line with expectations — while Eurozone Flash Manufacturing PMI came out at a somewhat disappointing 55.0, versus a consensus of 56.3. On Tuesday, the pair made its weekly low of 1.2708 as S&P downgraded Irish sovereign debt from AA+ to AA-. The S&P downgrade came despite last week’s strong demand for Irish debt and was partly the cause for the yield on Irish 10-year bonds to rise by 22 basis points to 5.478% — almost 50 basis points more than the 5% Greece is paying on its E.U. bailout package funding. In better news for the Euro, German Final GDP came out at 2.2% quarter on quarter — in line with market expectations — and Eurozone Industrial New Orders rose 2.5% — much better than the 1.6% expected. In addition, the Belgium NBB Business Climate survey showed a decline of -5.1 versus a worse expected decline of -6.1. Also on Tuesday, U.S. Existing Home Sales came out at 3.83M, considerably lower than the 4.68M expected, while the previous number was revised slightly downward from 5.37M to 5.26M. The U.S. Richmond Manufacturing Index printed lower at 11 versus a market consensus of 14. EUR/USD reversed its downtrend on Wednesday as German Ifo Business Climate came out at 106.7 versus a consensus of 105.8, while U.S. Core Durable Goods came in showing a disappointing decline of -3.8% — considerably worse than the rise of 0.6% expected. Nevertheless, the previous number was revised upward from a decline of -0.6% to a small increase of 0.2%. Furthermore, Durable Goods Orders rose just 0.3%, significantly lower than the 2.9% increase expected, although the previous number was revised upward from -1.0% to -0.1%. Also on Wednesday, U.S. New Home Sales came out at 276K, considerably less than the 333K expected, while the previous number was revised downward from 330K to 315K. Adding to the weak U.S. housing numbers was HPI, which declined by -0.3% month on month, versus an expected rise of 0.1%. Elsewhere on Wednesday, Ireland’s National Treasury Management Agency voiced strong disagreement with the aforementioned downgrade of Ireland’s sovereign debt by S&P. The Irish agency stated, "In terms of the specific analysis by S&P, this is largely predicated upon an extreme estimate of bank recapitalization costs of up to 50 billion euros." On Thursday, EUR/USD continued climbing as German GfK Consumer Climate came out at 4.1, in line with expectations, while Eurozone M3 Money Supply increased by 0.2% year on year, versus an expected 0.4%. Also on Thursday, U.S. Initial Jobless Claims came out at 473K, beating the expected 488K and representing a considerable improvement over the previous week’s 500K print, which was revised upward to 504K. In addition, U.S. Mortgage Delinquencies declined to 9.85% from a previous 10.06% number. Thursday was also the first day of the Kansas City Fed’s Economic Symposium held in Jackson Hole, Wyoming. On Friday, EUR/USD made its weekly high of 1.2778 despite news that German Import Prices declined -0.2% month on month, versus an expected increase of 0.1%, while German Preliminary CPI came out with a flat reading versus an expected increase of 0.2%. Also on Friday, U.S. Preliminary GDP came out slightly better than expected at 1.6%, versus an expected increase of 1.5%, while the Preliminary GDP Price Index rose by 1.9% quarter on quarter — just higher than the 1.8% consensus. Also on Friday, the University of Michigan Consumer Sentiment survey came out at 68.9, only slightly worse than the 69.8 number expected. Furthermore, Federal Reserve Chairman Ben Bernanke speaking on Friday in an address at the Jackson Hole Symposium made observations to the effect that the U.S. economy will continue expanding in the second half of the year — albeit not as strongly as was previously thought — and that the Fed will do all that it can to ensure the recovery continues. EUR/USD then sold off on profit taking to end the week at 1.2732, up 0.2% overall from the previous weekly close.USD/JPY had a volatile week last week, beginning the week by trading off of the pair’s weekly high of 85.69 seen on Monday. The rate then began heading south as BOJ Governor Shirakawa and Prime Minister Naoto Kan discussed recent forex market developments over the phone, as well as “economic conditions at home and abroad”. This led the market to believe that the BOJ would not be taking any immediate action to stem the recent Yen strength. On Tuesday, the rate made its weekly and 15-year low of 83.57 as the Japanese Trade Balance showed a surplus of 0.61T — considerably better than the expected 0.47T — while the previous number was revised slightly higher from 0.46T to 0.51T. Japanese Finance Minister Yoshihiko Noda also met with Prime Minister Kan and stated that the Japanese government would, “have to take appropriate action when necessary” to deal with the strong Yen. The rate then reversed and started heading higher on Wednesday despite weak U.S. housing numbers and in the absence of any economic data out of Japan. USD/JPY then paused somewhat on Thursday as the K.C. Fed’s Jackson Hole Symposium got under way, with BOJ Governor Shirakawa and other high level finance officials in attendance. Thursday also saw Japanese Household Spending increase by 1.1% year on year — versus an expected increase of 1.5%. In addition, Tokyo Core CPI declined by -1.1% year on year — just slightly better than the consensus of a -1.2% drop, and Japanese National Core CPI fell by 1.1% — as was widely expected. Also out on Thursday was the Japanese Unemployment Rate which contracted to 5.2% — just slightly better than the 5.3% expected. On Friday, the Greenback rebounded strongly against the Yen on the back of a slightly better U.S. GDP number, as well as comments from PM Naoto Kan which noted that, "volatile movements in the currency market have a negative impact on economic and financial stability." USD/JPY went on to close at 85.33, a drop of 0.3% on the week. GBP/USD started last week on a soft note by trading off of its weekly high of 1.5616 seen on Monday. The rate then made its weekly low of 1.5369 on Tuesday as the BOE’s Monetary Policy Committee’s newest member — Martin Weale — made comments to the effect that the growth forecast by the BOE might be too optimistic, with the U.K. economy facing the risk of a second recession, higher unemployment, falling housing prices and another crisis in the banking sector. He went on to observe that this could come in the form of, “a sovereign debt crisis or it could be a new liquidity crisis in the private sector." Also on Tuesday, U.K. BBA Mortgage Approvals came out at 33.7K — slightly worse than the 35.3K expected. On Wednesday, Cable recovered somewhat on weaker U.S. housing numbers which brought the rate up to 1.5466. Thursday saw the rate continue to improve after U.K. CBI Realized Sales came out at 35 — significantly higher than the market consensus of 23 and also better than the previous print of 33. On Friday, GBP/USD softened somewhat as U.K. Preliminary Business Investment declined by -1.6% versus an expected increase of 2.3%. Nevertheless, the previous number was revised significantly upward from +6.0% to +7.8%. Also out on Friday, U.K. Revised GDP rose 1.2% quarter on quarter — just edging the consensus of a 1.1% increase. Cable then went on to close at 1.5511, down just 0.1% on the week. AUD/USD gained some ground last week on the back of weaker U.S. economic numbers. This came despite the fact that the forex market was still digesting the news of the hung parliament in the previous weekend’s Australian lower house elections, which failed to deliver a majority government for the first time in 70 years. The pair began the week by selling off sharply in reaction to the political climate fresh out of the election, eventually trading down to 0.8857 before finding support. The pair continued heading south on Tuesday despite weaker U.S. New Home Sales and HPI numbers. Nevertheless, as gold rallied sharply from 1213 to 1235 in the wake of the Ireland downgrade by S&P, AUD/USD reversed and began climbing sharply. Also benefitting the Aussie was the market’s impression that prospects for a coalition government which would reduce or postpone a controversial mining tax appeared increasingly likely. In addition, Wednesday saw Australian Construction Work Done increase by 3.5% quarter on quarter, versus a lower expected increase of 3.0%, while the previous number was revised substantially higher to 4.2% from 1.9%. Spurred by this good news, the rate continued its run higher on Thursday as the Australian CB Leading Index increased by 0.1%, while the previous number was revised upward from 0.3% to 0.4%. On the negative side, Australian Private Capital Expenditure dropped by -4.0% — considerably worse than the increase of 2.3% expected — while the previous number was also revised downward from -0.2% to -1.0%. On Friday, AUD/USD rallied sharply — in spite of positive U.S. GDP numbers — to make its weekly high of 0.8997 before selling off on profit taking to close at 0.8989, showing an overall gain of 0.7% on the week. USD/CAD saw volatile trading last week, moving higher off of its weekly low of 1.0484 seen on Monday. The pair continued rallying sharply on Tuesday as Canadian Core Retail Sales disappointed the market by declining by -0.5% — versus an expected increase of 0.1% — while the previous number was revised down from -0.1% to -0.3%. Also, Retail Sales increased by only 0.1% month on month, versus an expected increase of 0.4%, with the previous number revised downward from -0.2% to -0.4%. USD/CAD then made its weekly high on Wednesday as Canadian Corporate Profits declined by a disappointing -1.8% quarter on quarter — versus a previous reading of an increase of 4.8%. The rate then started heading south on the back of stronger gold prices and weaker U.S. housing market numbers that began weighing on the Greenback. The rate continued trading off on Thursday, despite a better than expected U.S. Initial Jobless Claims release. On Friday, USD/CAD continued lower — in spite of better than expected U.S. GDP data — eventually ending the week at 1.0520, and showing an overall gain of 0.3% on the week. NZD/USD gained some ground last week, initially starting Monday off on a firm note, but then weakening after New Zealand Inflation expectations came in lower at 2.6% quarter on quarter, versus a previous reading of 2.8%. This sent the rate to test the 0.7000 level, which was subsequently broken on Wednesday when the pair made its weekly low of 0.6945. NZD/USD then reversed to trade higher in sympathy with gold and the Aussie and in the absence of any significant data coming out of New Zealand. On Thursday, NZD/USD continued rallying sharply despite positive U.S. Employment numbers. Friday saw NZD/USD make its weekly high of 0.7128 before selling off on profit taking to close the week at 0.7120, showing an overall gain of 0.7% on the week. The Week AheadUSD: The economic data week coming up in the United States heats up even further this coming week. In terms of data, it features the key employment data including Non Farm Payrolls and the U.S. Unemployment Rate due out on Friday. Monday starts the busy week off with the Core PCE Price Index (0.1% m/m), Personal Spending (0.4% m/m), Personal Income (0.3% m/m), and a speech by FOMC Member Bullard in St. Louis. Tuesday offers the S&P/CS Composite-20 HPI (3.7% y/y), Chicago PMI (57.5), CB Consumer Confidence (50.9), and the important FOMC Meeting Minutes. On Wednesday, watch for Challenger Job Cuts (last -57.2% y/y) and the ADP Non-Farm Employment Change (20K) for a clue to Friday’s big numbers. Wednesday also has scheduled ISM Manufacturing PMI (53.3), Construction Spending (-0.4% m/m), ISM Manufacturing Prices (55.8) and Total Vehicle Sales (11.6M). Thursday has the important weekly Initial Jobless Claims (477K), Revised Nonfarm Productivity (-1.9% q/q), Revised Unit Labor Costs (1.4% q/q), Pending Home Sales (-1.5% m/m) and Factory Orders (0.5% m/m). Friday will be the weekly highlight featuring the key Non Farm Payrolls number (-101K) and the U.S. Unemployment Rate (9.6%), as well as Average Hourly Earnings (0.1% m/m) and ISM Non-Manufacturing PMI (53.6).AUD: The coming week of economic data for Australia heats up considerably versus as last week, and its releases feature the important Australian GDP data due out on Wednesday. Monday starts the active week off with the release of Company Operating Profits (5.9% q/q), and the tentatively scheduled HIA New Home Sales (-5.1% m/m). Tuesday offers a speech by RBA Assistant Governor Debelle in Sydney, as well as important Building Approvals (-0.6% m/m) and Retail Sales (0.4% m/m) data. Also out on Tuesday are the Australian Current Account (-6.3B) and Private Sector Credit (0.3% m/m). Wednesday has scheduled the release of the AIG Manufacturing Index (last 54.4), Commodity Prices (last 51.0% y/y) and the highlighted Australian GDP data (0.9% q/q). Thursday has the Australian Trade Balance (3.11B) due out, while Friday ends the busy week with the AIG Services Index (last 46.6). Technically, AUD/USD traded down to a low of 87.69 last Wednesday before rallying up to 0.8997 on Friday to close the week on a stronger note at 0.8989. Last week’s price action remained within AUD/USD’s overall up channel that has a rising lower trend line now drawn at 0.8775. Resistance is seen just below the psychological 0.9000 level at 0.8997 and just above it in the 0.9016/77 region, as well as at 0.9163 and at 0.9220. Support for the rate is indicated in the 0.8840/57 and 0.8737/69 regions and at 0.8632. To view live charts follow these links: AUD/USDNZD: The coming week of economic data releases in New Zealand again has rather little to offer in terms of important numbers, but the week does feature the important NBNZ Business Confidence survey results due out on Monday (last 27.9). Also out on Monday is the New Zealand Trade Balance (-28M), while Tuesday offers Building Consents (last 3.5% m/m). Wednesday ends the week with the release of ANZ Commodity Prices (last -0.8% m/m) since Thursday and Friday have nothing significant due out. Technically, NZD/USD sustained recent losses last week below its previous upward sloping trend line now drawn at 0.7298. After starting last week near its highs, NZD/USD then traded sharply off to its weekly low of 0.6945 seen on Wednesday. The rate then recovered considerably to make its weekly high of 0.7128 on Friday before closing just lower at 0.7120. Support for NZD/USD is now seen on the charts in the 0.6994/0.7000 region — right around the key psychological 0.7000 level, as well as in the 0.6945/85 and 0.6793/0.6823 regions and at 0.6571. Resistance shows up in the 0.7080/0.7128 and the 0.7180/89 regions, and above those congestion regions at the 0.7264 level. To view live charts follow these links: NZD/USD NZD/EUR NZD/GBP NZD/JPYGBP: The week of upcoming economic data releases in the United Kingdom remains roughly as active as last week, and features important housing sector data like Wednesday and Thursday’s Halifax and Nationwide House Price Indexes (HPIs). Monday starts the week off on a quiet note as the U.K. observes its summer Bank Holiday, so Tuesday starts the economic data week with the release of GfK Consumer Confidence (-23), Net Lending to Individuals (0.7B m/m) and Final Mortgage Approvals (47K). On Wednesday, watch for the highlighted Halifax HPI (last 0.6% m/m) — that can also come out as late as September 7th — as well as Manufacturing PMI (57.1). Thursday offers the important Nationwide HPI (-0.3% m/m) and Construction PMI (53.7). Friday ends the week with Services PMI (53.1) and a speech by MPC Member Tucker in Seoul. Technically, GBP/USD started last week on a firm note by making its high of 1.5616 on Monday. Nevertheless, Cable then traded to fresh near term lows on Tuesday as it went down to 1.5369 before rebounding later in the week to 1.5595 before closing on Friday at 1.5511. The rate is currently trading just above its 200 day Moving Average that now comes in at 1.5456 and remains downward sloping. Resistance to the topside for GBP/USD shows in the 1.5590/1.5616 and 1.5669/1.5711 regions, and above that at 1.5817 and 1.5996 — just below the psychological 1.6000 level. Support is indicated at 1.5440/62 region, just below the psychological 1.5500 level, and then below that at 1.5369 and at 1.5227. To view live charts follow these links: GBP/USDEUR: The upcoming economic data week in the Eurozone calms down considerably from the previous week, but nevertheless features important data like Thursday’s Rate Decision from the European Central Bank. Monday is quiet, so Tuesday starts the week out on a very active note with the German Unemployment Change (-19K), Italian Retail Sales (0.2% m/m), the CPI Flash Estimate (1.6% y/y), the Eurozone Unemployment Rate (10.0%), Italian Preliminary CPI (0.2% m/m) and the Italian Monthly Unemployment Rate (8.6%). Wednesday offers German Retail Sales (0.6% m/m) and Final Manufacturing PMI (55.0), while Thursday has EZ PPI (0.2% m/m), Revised GDP (1.0% q/q), and the highlighted ECB Rate Decision and its associated Press Conference in which the central bank is expected to keep its Minimum Bid Rate unchanged at 1.00%. Friday ends the week with EZ Final Services PMI (55.6) and EZ Retail Sales (0.3% m/m). Technically, EUR/USD sold off as low as 1.2586 early last week, but then corrected upward to 1.2778 on Friday before closing the week a bit lower at 1.2732. In doing so, the rate made a fresh low last week that was confirmed by the 14-day RSI as it continued to sustain its downside break of a recent medium term upwards sloping trend line. Support for EUR/USD shows at 1.2586, in the 1.2480/1.2522 region and below that at 1.2151. Resistance to the topside is seen at 1.2778, at 1.2921 and in the 1.30007/28 region. To view live charts follow these links: EUR/USDJPY: The coming week of economic data releases in Japan is roughly as active as the previous week, and features important Japanese Retail Sales data due out on Tuesday. Monday is quiet, so Tuesday starts the week off with the release of the highlighted Japanese Retail Sales (3.1% y/y). Also out on Tuesday are Manufacturing PMI (last 52.8), Preliminary Industrial Production (-0.3% m/m), Average Cash Earnings (0.9% y/y) and Housing Starts (2.5% y/y). Wednesday has nothing of note scheduled for release, but Thursday has the Japanese Monetary Base (6.3% y/y). Friday ends the week with Capital Spending (-6.6% q/y). Technically, USD/JPY sold off sharply last Tuesday to make a new low at 83.57. The rate then traded higher during the rest of the week, eventually touching 85.43 on Friday before closing slightly lower at 85.33. Resistance for USD/JPY shows up in the 85.43/90 region, at 86.35, and in the 86.96/87.01 region. Initial strong support is seen in the 84.71/88 region, and below that at 84.25, at 83.57, and at the major 79.75 support level. To view live charts follow these links: JPY/USDCAD: The coming week of economic data due out in Canada is about as peaceful as the previous week, but it does feature the important Canadian GDP data due out on Tuesday. Monday starts the week out with the release of the Canadian Current Account (-10.2B), RMPI (0.3% m/m) and IPPI (0.5% m/m). Tuesday then has the highlighted Canadian GDP number (0.2% m/m) to close out the week since nothing else of note is scheduled for release. Technically, USD/CAD sustained its break of the upper descending trend line now drawn at 1.0454 of its apparent descending triangular consolidation pattern last week. The rate traded as high as 1.0665 on Wednesday before selling off to close at 1.0520 on Friday. The chart for USD/CAD now shows resistance at 1.0584, in the 1.0665/76 region and above that at 1.0742. Support for the rate shows up in the 1.0490/1.0516, 1.0347/90, 1.0201/1.0244 and 1.0104/79 regions ahead of key psychological support seen at the 1.0000 parity level. To view live charts follow these links: CAD/USD Subscribe to RSS commentary feed
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