Weekly Market Watch

Released 28 November 2016 - Weekly Newsletter

Last week recap

Closed virtually unchanged after a quiet week in which the United States observed a bank holiday on Thursday. While both economies reported mostly better than expected economic numbers, the Greenback was supported by increasing expectations of a December Fed rate hike. The rate began the week on a positive note, gaining on Monday after comments from ECB President Draghi, who stated that, “Since the beginning of the year headline inflation has gradually picked up, moving from the negative rate of -0.2 in February to 0.5 in October. Our monetary policy measures since June 2014­ have been a key factor behind these positive developments. Asset purchases, targeted longer-term refinancing operations (TLTROs) and low policy rates have strongly supported the recovery.” The pair consolidated at a slightly lower level after making its weekly high of 1.0657 on Tuesday after U.S. Existing Home Sales printed at +5.60M versus an expectation of +5.43M. On Wednesday, the rate began selling off after the FOMC Meeting Minutes noted some dissenting members in its most recent rate decision, stating that, “Two members preferred to raise the target range for the federal funds rate by 25 basis points at this meeting. They saw inflation as close to the 2 percent objective and viewed an increase in the federal funds rate as appropriate at this meeting because they judged that the economy was essentially at maximum employment and that monetary policy was unable to contribute to a permanent further improvement in labor market conditions in these circumstances.” Also, U.S. Core Durable Goods Orders increased +1.0% m/m, versus +0.2% expected, while the headline numbers showed an impressive increase of +4.8% m/m versus an expected +1.2% print. In Europe, German Flash Manufacturing PMI printed at 54.4 versus an expected reading of 54.8; nevertheless, German Flash Services PMI came out with a reading of 55.0 versus 54.1 anticipated. Also out was French Flash Manufacturing PMI, which printed at 51.5 as was widely expected, and French Flash Services PMI, with a reading of 52.6 compared to an expectation of 52.1. The pair consolidated at a slightly lower level after making its weekly low of 1.0517 on Thursday after German Ifo Business Climate printed at 110.4, in line with expectations. Friday saw the pair gain in the absence of any significant numbers from either economy. EUR/USD closed at 1.0595, up a mere +1 pip and virtually unchanged on the week.
Continued its rally last week as asset flows favoured the Greenback over the Yen with very little significant economic data out of Japan. The week began with the pair losing a fraction on Monday in the absence of any significant economic numbers from either country. The rate them made its weekly low of 110.26 on Tuesday after a positive U.S. housing number. On Wednesday, the pair extended its gains after a hawkish FOMC Meeting Minutes and better than expected U.S. Durable Goods numbers. The pair continued its rally on Thursday as the United States observed a bank holiday with no significant data from Japan. The rate then sold off on Friday after making its weekly high of 113.88 as Japanese Tokyo Core CPI declined -0.4% y/y as was widely expected. USD/JPY closed at 113.00, with an overall weekly gain of +1.9%.
Gained ground last week as the UK reported better than expected economic numbers and despite a hawkish FOMC Meeting Minutes. Cable began the week gaining after making its weekly low of 1.2311 on Monday in the absence of any significant numbers out of either country. The rate then declined after making its weekly high of 1.2511 on Tuesday after UK Public Sector Net Borrowing fell to 4.3B compared to an expected 5.9B, with the previous reading downwardly revised to 9.2B from 10.1B. Cable then gained a fraction on Wednesday after the UK’s Autumn Forecast Statement noted that, “At its November meeting, the MPC voted unanimously to maintain the package of measures announced in August, and noted that the measures have supported financial conditions. Market interest rates have remained low, with the average rate on a new variable rate mortgage now below 2%.”On Thursday, the pair added another fraction as the United States observed a bank holiday with no significant numbers out of the UK. Friday saw Cable gain another fraction after UK Second Estimate GDP increased +0.5% q/q as was widely anticipated. GBP/USD closed at 1.2463, with an increase of +0.9% from its previous weekly close.
Reversed direction, gaining ground last week as commodity and crude oil prices supported the rate with very little significant economic data out of Australia. The rate began the week making its weekly low of 0.7310 in the absence of any significant economic data from either country. The pair continued higher on Tuesday after comments from RBA Assistant Governor Kent, stating that, “A key reason for the differences across the states over recent years has been the effect of the large declines in mining investment and commodity prices. These have contributed to weaker economic conditions in the mining states and, therefore, weighed on economic conditions nationally. But those forces are waning; indeed, the terms of trade have even risen of late. Hence, there are reasonable prospects for stronger growth of nominal demand in the mining states and, by extension, for the economy overall.” On Wednesday, the pair sold off after Australian Construction Work Done declined -4.9% q/q significantly lower than the -1.5% that was anticipated. Thursday saw the pair resume its rally as the United States observed a bank holiday with no significant data out of Australia. The rate then made its weekly high of 0.7467 on Friday, again, with no significant numbers out of either country. AUD/USD closed at 0.7432, with an overall gain of +1.2% for the week.
Gained a fraction last week as the price of crude oil rallied while Canada reported lower than expected economic data. The week began with the rate falling on Monday despite Canada reporting Wholesale Sales had declined -1.2% m/m compared to an expected increase of +0.3%. The rate then rallied after it made its weekly low of 1.3377 on Tuesday as Canadian Retail Sales increased +0.6% m/m versus an expectation of +0.7%, while Core Retail Sales increased +0.0% m/m versus an expected increase of +0.6%. The pair extended its gains on Wednesday after better than expected U.S. Durable Goods Orders data. On Thursday, the rate consolidated at a slightly higher level as the United States observed a bank holiday, with no significant data out of Canada. The pair then made its weekly high of 1.3533 on Friday in the absence of any significant numbers out of either country. USD/CAD closed at 1.3521, with an overall gain of +0.2% for the week.
Gained a fraction last week as both countries reported mixed economic numbers. The rate began the week trading higher on Monday despite New Zealand Core Retail Sales, which increased +0.3% q/q versus an expectation of +1.1%. The pair then consolidated after making its weekly high of 0.7085 on Tuesday as the United States reported a better than expected housing number. The rate extended its losses on Wednesday after better than expected U.S. Durable Goods Orders data. Thursday saw the pair make its weekly low of 0.6971 despite the New Zealand Trade Balance, which showed a deficit of -846M compared to an expected -950M. The pair then recovered on Friday in the absence of any significant numbers out of either country. NZD/USD closed at 0.7040, with an overall weekly gain of +0.4%.

The week ahead

AUD The Australian economic calendar is rather sparse this coming week, only featuring Building Approvals (2.2%) and the OPEC Meetings on Wednesday; Private Capital Expenditure (-2.8%) on Thursday and Retail Sales (0.3%) on Friday. Resistance for AUD/USD is seen at 0.7826/34, 0.7708/0.7834, 0.7614/96 and 0.7444/0.7557, with support noted at 0.7232/0.7407, 0.7096/0.7144 and 0.6826/0.6909.

CAD The Canadian economic calendar is unusually busy this coming week, featuring GDP and jobs data on Wednesday and Friday. Tuesday starts the week’s highlights off with a speech by BOC Governor Poloz and the Current Account (-16.4B), and Wednesday’s key events include the OPEC Meetings, GDP (0.1%) and the RMPI (3.2%). Thursday then has nothing notable scheduled, while Friday’s important data then concludes the week with the Employment Change (0.1K), the Unemployment Rate (7.0%) and Labor Productivity (1.1%). Resistance for USD/CAD is seen at 1.4001, 1.3638 and 1.3524/88, while support shows at 1.3194/1.3464, 1.2999/1.3005 and 1.2923/38.

EUR The Eurozone economic calendar is quite busy this coming week, featuring CPI data on Wednesday. Monday starts the week’s highlights off with the EZ M3 Money Supply (5.0%) and a speech by ECB President Draghi, and Tuesday’s key events include German Preliminary CPI (0.1%) and Spanish Flash CPI (0.5%). Wednesday then offers German Retail Sales (1.0%), the German Unemployment Change (-6K), the OPEC Meetings, the EZ CPI Flash Estimate (0.6%), the EZ Core CPI Flash Estimate (0.8%), and a speech by ECB President Draghi. Thursday features Spanish Manufacturing PMI (53.7), and Friday’s important data then concludes the week with the Spanish Unemployment Change (-25.8K). Resistance for EUR/USD is seen at 1.0910/1.0964, 1.0807/58 and 1.0657/1.0776, with support showing at 1.0568, 1.0516/1.0519 and 1.0461.

GBP The UK economic calendar is moderately active this coming week, featuring Bank Stress Test results on Wednesday. Tuesday starts the week’s highlights off with Net Lending to Individuals (4.8B), and Wednesday then offers the Bank Stress Test Results, the BOE Financial Stability Report and the OPEC Meetings. Thursday features Manufacturing PMI (54.4), and Friday’s important data then concludes the week with Construction PMI 52.3. Resistance to the topside for GBP/USD shows at 1.2790/1.2864, 1.2673 and 1.2511/56, while support for the pair is expected at 1.2226/1.2351, 1.2081/1.2145 and 1.1991.

JPY The Japanese economic calendar is sparse this coming week, only featuring Household Spending (-1.0%) on Monday and the OPEC Meetings on Wednesday. Resistance for USD/JPY currently shows up at 116.86, 115.96/116.07 and 113.79/114.55, with support indicated at 111.44/87, 110.08 and 107.47/108.22.

NZD The New Zealand economic calendar is fairly quiet this coming week, only featuring the RBNZ Financial Stability Report on Tuesday and the ANZ Business Confidence survey (24.5), a speech by RBNZ Governor Wheeler and the OPEC Meetings on Wednesday. The chart for NZD/USD shows resistance at 0.7339/0.7420, 0.7107/0.7202 and 0.7034/0.7086. On the downside, technical support is expected at 0.6949/0.7011, 0.6806/96 and 0.6674.

USD The U.S. economic calendar is unusually busy this coming week, featuring key jobs data on Wednesday and Friday. Tuesday starts the week’s highlights off with Preliminary GDP (3.0%), speeches by FOMC Members Dudley and Powell, and the CB Consumer Confidence survey (101.3). Wednesday then offers the OPEC Meetings, the ADP Non-Farm Employment Change (161K), the Core PCE Price Index (0.1%), Personal Spending (0.5%), the Chicago PMI (52.1), Pending Home Sales (0.3%), Crude Oil Inventories (last -1.3M) and a speech by FOMC Member Powell. Thursday features Weekly Initial Jobless Claims (252K) and ISM Manufacturing PMI (52.1), and Friday’s important data then concludes the week with Average Hourly Earnings (0.2%), Non-Farm Payrolls (165K), the Unemployment Rate (4.9%) and a speech by FOMC Member Brainard.


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