Weekly Market Watch

Released 31 October 2016 - Weekly Newsletter

Last week recap

Reversed direction, rallying last week as the Eurozone reported mostly better than expected economic data with mixed numbers from the United States. The week began with the pair consolidating at a slightly higher level on Monday after German Flash Manufacturing PMI printed at 55.1 versus 54.3 expected, while French Flash Manufacturing PMI showed a reading of 51.3 compared to an expectation of 50.2. Also, German Flash Services PMI printed at 54.1 compared to 51.9 expected and French Flash Services PMI came in at 52.1 versus 54.1 expected. The rate then gained a fraction after making its weekly low of 1.0850 on Tuesday after German Ifo Business Climate printed at 110.5 versus an expectation of 109.6. Also supporting the pair was U.S. CB Consumer Confidence, which showed a reading of 98.6 compared to an expected print of 101.5. The rate continued higher on Wednesday after U.S. New Home Sales showed an annualized 593K versus 601K expected. The pair then declined a fraction on Thursday despite the Spanish Unemployment Rate, which declined to 18.9% from 20.0% with an expectation of 19.3%. Also out on Thursday were the EZ M3 Money Supply, which showed an increase of 5.0% y/y, in line with expectations and U.S. Durable Goods Orders, which declined -0.1% m/m versus an expected increase of +0.1%, while Core Durable Goods Orders increased +0.2% as widely anticipated. Other Thursday data included U.S. Weekly Initial Jobless Claims, at 258K versus 261K expected and U.S. Pending Home Sales, which increased +1.5% m/m versus +1.2% expected. The pair gained sharply on Friday, making its weekly high of 1.0991 after German Preliminary CPI increased +0.7% m/m versus +0.3% expected and despite U.S. Advance GDP, which increased +2.9% q/q versus +2.5% expected, while the Advance GDP Price Index increased +1.5% q/q versus +1.3% anticipated. EUR/USD closed at 1.0986, with an overall weekly gain of +1.0%.
Gained ground last week as asset flows favoured the Greenback over the Yen and despite better than expected economic numbers out of Japan. The week began on a positive note, with the rate gaining after making its weekly low of 103.71 on Monday despite the Japanese Trade Balance, which showed a surplus of +0.35T versus +0.21T expected, with the previous number downwardly revised from +0.41T to +0.36T, and Japanese Flash Manufacturing PMI, which printed at 51.7 compared to an expectation of 50.6. The pair consolidated at a slightly higher level on Tuesday despite a lower than expected U.S. CB Consumer Confidence number. On Wednesday, the pair continued its rally despite a lower than expected U.S. New Home Sales number. The rate extended its gains on Thursday after mixed U.S. Durable Goods Orders data and a positive Pending Home Sales number. The rate then declined sharply on Friday after Japanese Household Spending declined -2.1% y/y versus -2.6% expected, and Tokyo Core CPI, which declined -0.4% compared to an expectation of -0.5%. USD/JPY went on to close at 104.73, with an overall gain of +0.9% from its previous weekly close.
Renewed its downtrend last week, declining a fraction as the United States reported mixed economic numbers with very little significant data out of the UK. Cable began the week gaining a fraction on Monday in the absence of any significant economic data out of either country. The pair then made its weekly low of 1.2081 on Tuesday after comments from BOE Governor Mark Carney, who testified before the House of Lords Economic Affairs Committee that, “We are not a targetter of the exchange rate, we target inflation, but we are not indifferent to the level of the exchange rate. We have seen in recent weeks a fairly substantial shift in the exchange rate. It''s undoubtedly something we will take into account over the course of the next week as we sit down, update our forecast and make our policy decision.” The rate gained a fraction on Wednesday after a lower than expected U.S. housing number. On Thursday, Cable made its weekly high of 1.2270 before selling off despite UK Preliminary GDP, which increased +0.5% versus +0.3% expected. The pair then gained a fraction on Friday despite a better than expected U.S. Advance GDP number, which brought Cable to close at 1.2184, with an overall decline of -0.3% for the week.
Showed little change for a second consecutive week as both countries reported mixed economic numbers. The rate began the week consolidating on Monday in the absence of any significant economic data out of either country. The pair then gained sharply on Tuesday after a lower than expected U.S. CB Consumer Confidence number. On Wednesday, the rate made its weekly high of 0.7708 after Australian CPI increased +0.7% q/q versus an expectation of +0.5%, while Trimmed Mean CPI increased +0.4% as was widely anticipated. The pair then sold off on Thursday after the United States reported mixed Durable Goods Orders and Pending Home Sales data. The rate gained a fraction on Friday after it made its weekly low of 0.7557 after Australian PPI increased +0.3% q/q versus +0.6% anticipated, which brought the rate to close at 0.7596, with an overall decline of just -8 pips and virtually unchanged on the week.
Gained fractionally last week as the price of crude oil declined below the $50 per barrel handle with very little significant economic data out of Canada. The week began with the rate declining on Monday after Canadian Wholesale Sales increased +0.8% m/m versus an expectation of +0.2%. Also pressuring the rate were comments by BOC Governor Poloz, who stated that, “Low interest rates are actually doing a great deal to support the economy. To illustrate this point, if we were to raise interest rates to pre-crisis levels, say 3 to 4 per cent, there would be a significant contraction in the economy, and it is these contractionary forces that we are offsetting with low interest rates.” The pair then made its weekly low of 1.3276 on Tuesday before gaining as the price of crude oil broke the $50 per barrel level and despite a lower than expected U.S. CB Consumer Confidence number. On Wednesday, the rate continued its rally despite a lower than expected U.S. housing number. Thursday saw the rate extend its gains as the United States reported mixed Durable Goods Orders data. The pair then made its weekly high of 1.3433 on Friday after a positive U.S. Advance GDP number. USD/CAD closed at 1.3388, with an overall weekly gain of +0.5%.
Showed little change last week as the United States reported mixed economic numbers while New Zealand reported a wider than expected Trade deficit. The rate began the week on a quiet note, with New Zealand observing a bank holiday on Monday and no significant data out of the United States. The pair rallied on Tuesday after a lower than expected U.S. CB Consumer Confidence number. On Wednesday, the rate fell a fraction after making its weekly high of 0.7183 after the New Zealand Trade Balance showed a deficit of -1.436B versus an expected deficit of -1.125B. Thursday saw the pair extend its losses, making its weekly low of 0.7107 after mixed U.S. Durable Goods Order and Pending Home Sales data. The rate then rebounded on Friday despite a better than expected U.S. Advance GDP number. NZD/USD closed at 0.7163, with a gain of just +3 pips and virtually unchanged on the week.

The week ahead

AUD The Australian economic calendar is rather active this coming week, featuring the RBA Rate Decision on Monday. Monday starts the week’s highlights off with the RBA’s Cash Rate Decision (unchanged at 1.50%) and the RBA Rate Statement, and Tuesday’s key events include Building Approvals (-2.8%). Wednesday then offers the Trade Balance (-1.71B), while Thursday features the RBA’s Monetary Policy Statement and Retail Sales (0.4%) to conclude the week’s highlights. Resistance for AUD/USD is seen at 0.7826/34, 0.7708/64 and 0.7614/91, with support noted at 0.7401/0.7586, 0.7232/0.7370 and 0.7284/99.

CAD The Canadian economic calendar is considerably busier than usual this coming week, featuring jobs data on Friday. Monday starts the week’s highlights off with the RMPI (-0.7%), and Tuesday’s key events include GDP (0.2%) and a speech by BOC Governor Poloz. Wednesday then offers a speech by Governing Council Member Wilkins, while Thursday features a speech by BOC Governor Poloz. Friday’s important data then concludes the week with the Employment Change (-10.0K), the Unemployment Rate (7.0%), the Trade Balance (-1.7B) and Ivey PMI (58.4). Resistance for USD/CAD is seen at 1.4001, 1.3638 and 1.3432/1.3456, while support shows at 1.3194/1.3397, 1.2999/1.3005 and 1.2923/38.

EUR The Eurozone economic calendar is moderately busy this coming week, featuring inflation and growth data on Monday. Monday starts the week’s highlights off with German Retail Sales (0.2%), the EZ CPI Flash Estimate (0.5%), the EZ Core CPI Flash Estimate (0.8%) and Preliminary Flash GDP (0.3%), and Tuesday’s key events include Bank Holidays in France and Italy. Wednesday then offers Spanish Manufacturing PMI (52.7) and the German Unemployment Change (0K), while Thursday concludes the week’s highlights with the Spanish Unemployment Change (77.3K). Resistance for EUR/USD is seen at 1.1220/33, 1.1103/1.1196 and 1.1028/70, with support showing at 1.0910/1.0964, 1.0807/58 and 1.0710/76.

GBP The UK economic calendar is very active this coming week, featuring the Official Bank Rate Decision on Thursday. Monday starts the week’s highlights off with Net Lending to Individuals (4.6B), and Tuesday’s key events include Manufacturing PMI (54.6). Wednesday then offers Construction PMI (51.9), while a busy Thursday features Services PMI (52.5), the BOE Inflation Report, the MPC’s Official Bank Rate Votes (0-0-9), the Monetary Policy Summary, the Official Bank Rate (unchanged at 0.25%), the Asset Purchase Facility (unchanged at 435B), the MPC’s Asset Purchase Facility Votes (0-0-9) and a speech by MPC Member Cunliffe. Friday’s highlights then conclude the week with a speech by MPC Member Forbes. Resistance to the topside for GBP/USD shows at 1.2794/1.2864, 1.2324/32 and 1.2226/71, while support for the pair is expected at 1.2113/45, 1.2081/88 and 1.1991.

JPY The Japanese economic calendar is fairly active this coming week, starting on Monday with the tentatively scheduled BOJ Outlook Report, BOJ Policy Rate (unchanged at -0.10%) and BOJ Monetary Policy Statement. Tuesday’s key events include the tentatively scheduled BOJ Press Conference, while Wednesday is a Japanese Bank Holiday. Resistance for USD/JPY currently shows up at 107.47, 106.31/80 and 104.63/105.59, with support indicated at 104.12/15, 103.16/38 and 100.67/102.85.

NZD The New Zealand economic calendar is busier than usual this coming week, featuring jobs data on Tuesday. Sunday starts the week’s highlights off with ANZ Business Confidence (last 27.9), and Tuesday’s key events then conclude the week’s highlights with the tentatively scheduled GDT Price Index (last 1.4%), the Employment Change (0.6%), the Unemployment Rate (5.1%) and Inflation Expectations (last 1.7%). The chart for NZD/USD shows resistance at 0.7483, 0.7202/0.7420 and 0.7164/86. On the downside, technical support is expected at 0.7107/42, 0.7034/0.7086 and 0.6949/78.

USD The U.S. economic calendar is very busy this coming week, featuring key jobs data and the Fed Funds Rate Decision. Monday starts the week’s highlights off with Core PCE Price Index (0.1%), Personal Spending (0.5%), Chicago PMI (54.1), and Tuesday’s key events include ISM Manufacturing PMI (51.8). Wednesday then offers the ADP Non-Farm Employment Change (166K) and Crude Oil Inventories (last -0.6M), the FOMC Statement and the Federal Funds Rate Decision (unchanged at <0.50%), while Thursday features Weekly Initial Jobless Claims (258K), Preliminary Nonfarm Productivity (1.7%), Preliminary Unit Labor Costs (1.6%), ISM Non-Manufacturing PMI (56.2) and Factory Orders (0.2%). Friday’s important data then concludes the week with Average Hourly Earnings (0.3%), Non-Farm Payrolls (175K), the Unemployment Rate (4.9%), the Trade Balance (-39.2B) and a speech by FOMC Member Fischer.


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