Weekly Forex Update
The US Dollar extended its winning streak for the week ending May 17, closing at its strongest level in nearly three years against other major currencies, on broad optimism over the strength of the US economy and amid growing anticipation that the Federal Reserve will move to wind down its bond-buying program.
During the week, the greenback came under some selling pressure on Thursday, following a rise in US weekly jobless claims, mixed signals from the housing market, and data showing a contraction in Philadelphia region’s manufacturing activity in May. However, the USD rebounded after San Francisco Federal Reserve President, John Williams opined that the Fed could slow the pace of buying $85 billion a month in bonds, possibly as early as the summer if the economy expands in line with forecasts.
The greenback extended its gains on Friday, after a bigger-than-expected increase in the University of Michigan consumer sentiment index signaled a better outlook for consumer spending in the US. Also, the Conference Board’s leading economic index rose in April to its highest level in nearly five years.
Ahead in the week, markets are expected to keep an eye on US durable goods order data, wherein a positive reading would support the case for an earlier withdrawal of monetary easing by the Fed. Additionally, existing and new home sales data for April due later this week will provide insights into the state of the nation’s housing market. Investors will closely scrutinize the minutes of the FOMC meeting and the Fed Chief, Ben Bernanke’s testimony later in the week, for cues on the central bank’s policy stance going forward.
The Euro lost ground against the US Dollar as a lack of decisive triggers prompted investors to adopt a cautious approach. Economic data in the Euro-zone was very weak, as GDP and PMI numbers continued to miss market expectations. Recent comments from the European Central Bank policymakers regarding negative deposit rates also proved to be a dampener for the Euro.
In the UK, jobless claims declined for April, while the unemployment rate unexpectedly slipped for the three months ended March. The BoE Governor, Mervyn King, in his last quarterly inflation report before he is set to be succeeded by Mark Carney in July 2013, predicted that UK’s growth would be faster and inflation lower than what was expected three months earlier, though he still warned that the recovery could not be taken for granted.
The Australian Dollar staged a sharp decline against the greenback on dismal economic data in China, Australia’s largest trading partner, and after the Australian Treasurer, Wayne Swan stated that the nation would grow 2.75% over the next year, less than the earlier forecast for 3.0%.
The Canadian Dollar registered heavy losses on Friday, after economic data showed that Canada’s annual inflation rate fell sharply in April, far below expectations and well below the Bank of Canada’s target range, boosting the case for relaxing monetary policy.
EUR USD
Last week, the EUR traded 1.15% lower against the USD and closed at 1.2839, hovering near its recent lows, amid speculation that the ECB was checking banks’ preparedness to handle a potential cut in its deposit rates to below zero. Also, ECB board members, Joerg Asmussen and Benoit Couere, indicated that monetary policy will remain accommodative. Investors also added favorable bets on the dollar, as debate over whether the Federal Reserve would wind down its asset buying programme later this year gathered pace. Economic data released in Europe was also not inspiring, with economic activity across the region falling by 0.2% in the first three months of 2013, while inflation in the 17-nation region fell 0.1% in April, slowest in three years.
During the week, the pair traded at a high of 1.3029 and a low of 1.2797. The pair is expected to find its first support at 1.2748, with the next support expected at 1.2656. The first resistance is at 1.2980 and the next at 1.3120.
GBP USD
Despite upbeat jobless claims data in the UK and unexpected decline in the nation’s unemployment rate, the GBP slipped 1.23% against the USD in the last week, closing at 1.5169, as comments from the US Fed policymakers continued to signal that a withdrawal of the current monetary stimulus remains on the cards, dragging high yield currencies lower. During the week, the Bank of England (BoE) Governor, Mervyn King offered some good news for the British economy, after the central bank predicted in its quarterly inflation report that the nation’s growth would be faster and inflation lower than it had expected three months earlier. The pair traded at a high of 1.5385 and a low of 1.5158 in the previous week. GBPUSD is expected to find its first support at 1.5090, with the next at 1.5010. Resistance exists first at 1.5317, and then at 1.5464.
A raft of key economic releases from the UK due this week will provide further insights into the pace of the nation’s recovery. Traders would also keenly focus on the BoE minutes due this week. Given an improvement in economic data released in recent weeks, it would be interesting to see if the minutes show a less dovish voting pattern.
USD JPY
The USD traded 1.56% higher against the JPY over the past week, closing at 103.21. The Yen lost steam against the US Dollar as prospects for the Bank of Japan to maintain its accommodative stance for a longer period rose, after Japan escaped criticism about its aggressive monetary easing programme at the G-7 finance ministers meeting. Meanwhile, the greenback rallied during the last week, in part due to speculation that the Federal Reserve might terminate its current round of quantitative easing, amid signs of an improved economic landscape in the US. However, the Yen registered handsome gains on Thursday, after Japanese first quarter GDP data surpassed market estimates, providing a boost to Prime Minister Shinzo Abe’s reform efforts. The pair traded at a high of 103.31 and a low of 101.26. The pair is expected to find its first support at 101.88, with the next support expected at 100.54. The first resistance is at 103.93 and the next at 104.64.
In the week ahead, investors will be focusing on Bank of Japan’s interest rate decision to be followed by the press conference by Governor Haruhiko Kuroda.
USD CHF
USD traded 1.66% higher against the CHF and closed at 0.9727 in the last week, as traders continued to increase their positions in the greenback on rising perceptions that the US Federal Reserve is getting closer to taper its existing bond buying program. On the economic front, real retail sales in Switzerland dropped 0.9% (YoY) in March, following a revised 2.3% increase recorded in the previous month. Additionally, the Swiss ZEW survey indicator for economic expectations fell sharply to a reading of 2.2 in May, compared to a reading of 20.0 in the previous month. Market had expected it to rise to 25.0 in May. During the period, the pair traded at a high of 0.9761 and a low of 0.9521. The first support is at 0.9578, and the next at 0.9430. Resistance exists first at 0.9818, and then at 0.9910.
With not much on the domestic economic calendar during the week, the direction of the Swiss Franc is likely to be determined by external factors.
USD CAD
Last week, the USD traded 1.79% higher against the CAD and closed at 1.0281, drawing support from comments by Federal Reserve policymakers who indicated that the Fed could curtail its easing program sooner than anticipated. The losses in the Canadian Dollar aggravated on Friday, after softer-than-expected domestic inflation data led investors away from the Loonie. Canada’s consumer price index contracted 0.2% (MoM) in April from March, defying expectations for a 0.1% gain. The country’s core CPI rose 0.1%, less than market expectations for a 0.2% gain, sparking speculation that the Bank of Canada has room to trim interest rates if need be.
USDCAD traded at a high of 1.0313 and a low of 1.0082 in the previous week. The first support is at 1.0138, with the next at 0.9994. The first resistance is at 1.0369, while the next is at 1.0456.
AUD USD
AUD tumbled 2.94% against the USD in the last week, and closed at 0.9730, on disappointing economic data from China, uninspiring domestic federal budget and amid broad strength in the US Dollar. The Australian Dollar witnessed sharp selling pressure, after the Australian Treasurer, Wayne Swan, in his federal budget, indicated that the nation is likely to register a $19.2 billion deficit for the current financial year largely affected by a slowdown in mining activity. During the week, the pair traded at a high of 1.0011 and a low of 0.9711. The first support is at 0.9624 and the next at 0.9517. The first resistance is at 0.9924 and the next at 1.0117.
Ahead this week, data on leading economic indicators and Westpac consumer confidence data is due for release. Traders are likely to focus on the Reserve Bank of Australia (RBA’s) minutes of its most recent policy setting meeting.
Gold
In the prior week, Gold plummeted 6.18% against the USD and closed at USD1359.55, on growing speculation that the Federal Reserve could soon begin to rein in its bond-buying program. Also, data released on Friday showed that the US consumer sentiment hit an almost six-year high in early May, further supporting the view that the Fed could curtail its easing program earlier than previously estimated. Additionally, physical demand for the precious metal showed signs of softening.
The yellow metal traded at a high of 1445.57 and a low of 1355.60 in the previous week. Gold is expected to find support at 1328.24 and the next at 1296.94. The first resistance is at 1418.21, while the next is at 1476.88.
Crude Oil
Oil prices traded almost flat against the USD in the last week to close at USD96.02. Oil prices started the week on a negative note, weighed by concerns over weakening demand in China after nation’s industrial production rose at a slower pace in April. Oil prices also came under pressure, after the International Energy Agency (IEA) indicated that crude oil supply would surge through 2018. However, crude oil prices recouped its losses on rising Middle East concerns after an unsuccessful meeting between United Nations’ nuclear agency officials and Iranian representatives to allow the former to investigate a suspected atomic bomb research, leaving the ongoing diplomacy talks in deadlock. Oil prices climbed further on Friday, supported by a raft of strong economic data from the US. On the inventory front, the Energy Information Administration reported that crude oil inventories declined by 624,000 barrels for the week ended May 10, after the American Petroleum Institute (API) reported one day earlier that crude oil inventories rose more-than-expected by 1.11 million barrels in the week ending May 10.
Oil traded at a high of 96.45 and a low of 92.13 in the previous week. Oil has its first major support at 93.28, while the next support exists at 90.55. The first resistance is at 97.60 and the next at 99.19.
Weekly Forex Update
The US Dollar registered handsome gain against basket of currencies last week, as economic data in the US indicated signs of recovery in the nation’s labor market. The major spurt in the greenback came on Thursday after data indicated that less than expected number of individuals filed for unemployment assistance in the US for the week ended May 4.
The gains in the US Dollar were also supported, after the Philadelphia Federal President Charles Plosser and Chicago Fed Chief Charles Evans, voiced support for discontinuation of monetary easing program.
Meanwhile, finance ministers and central bank governors of the G7 economies reaffirmed their commitment not to seek depreciation of their currencies for domestic gains.
The movement in the USDJPY stole the headlines last week, as the greenback managed to break above the ¥100 mark on Thursday after the release of weekly US jobless data. Additionally, the USD’s climb against the Yen accelerated to above ¥101 on Friday, after the Ministry of Finance’s weekly portfolio data revealed that Japanese investors have finally become net buyers of foreign bonds after selling them for 6 straight weeks.
Meanwhile, comments by the European Central Bank (ECB) Chief, that he is open to negative interest rates in a bid to encourage banks to lend, played on traders mind as the Euro declined sharply against the USD and the other peers. Moreover, the ECB trimmed its 2013 GDP estimate to a contraction of 0.4% from a flat reading expected previously. The central bank also slashed the GDP growth estimate for 2014 to 1.0% from 1.1% estimated previously.
In the UK, industrial and manufacturing production rose more-than-estimated in March, while the NIESR estimates revealed that the Britain’s economy gathered pace in the three months to April, the fastest since September last year. However the agency pointed out that the underlying growth is weaker. Meanwhile, in contrast to the major global central banks adopting aggressive stimulus measures, the Bank of England (BoE) maintained its asset-purchase program at £375 billion ($581 billion) and kept interest rates at a record low.
The Aussie Dollar and the Kiwi Dollar fell sharply against the greenback after central banks in both countries took steps to curb strength in their currencies earlier in the week. The New Zealand Dollar slumped 2.8% for the week, after the Governor of the Reserve Bank of New Zealand, Graeme Wheeler, on Wednesday indicated that the central bank had intervened in the foreign exchange market amid concerns over the strength of its currency. Meanwhile, the week witnessed unexpected interest rate cuts by the Reserve Bank of Australia and the Bank of Korea.
EUR USD
Last week, the EUR traded 0.96% lower against the USD and closed at 1.2983. The latest cut in benchmark interest rates by the ECB and the hint of further possible easing, coupled with the ECB chief’s comment that the central bank was prepared for negative rates if required proved a dampener for the Euro. Also, revised services PMI data released in Europe showed that the region continued to remain in contraction territory, though the extent of contraction reduced in April. The common currency however rebounded during middle of the week after the release of upbeat German factory orders data, successful bond auctions in Portugal and inspiring Chinese trade data. The Euro again fell later, as the greenback enjoyed support stemming from Thursday’s weekly data on jobless claims. During the week, the pair traded at a high of 1.3195 and a low of 1.2935. The pair is expected to find its first support at 1.2880, with the next support expected at 1.2778. The first resistance is at 1.3140 and the next at 1.3298.
Taking a look at this week’s economic calendar, apart from releases across the Atlantic, the Euro-zone’s preliminary data on first quarter gross domestic product and region’s consumer price inflation data would be the key to the EURUSD movement.
GBP USD
In the last week, GBP traded 1.36% lower against the USD and closed at 1.5354. On Friday, the Pound came under pressure after UK trade data disappointed while upbeat jobless claims in the US released on Thursday supported gains in the US Dollar. During last week, signs that the UK economy is gaining traction emerged after monthly industrial activity rose more than expected in March, while the nation’s trade deficit narrowed. Furthermore, the National Institute of Economic and Social Research (NIESR) estimated that the nation grew by 0.8% for the three months period ended April 2013. Also, the Bank of England maintained status quo on expected lines in its policy meeting during the previous week. The pair traded at a high of 1.5599 and a low of 1.5314 in the previous week. GBPUSD is expected to find its first support at 1.5246, with the next at 1.5137. Resistance exists first at 1.5531, and then at 1.5707.
Apart from UK economic data, the Bank of England’s quarterly inflation report and Governor Mervyn King’s speech following the release of the report would generate market interest.
USD JPY
The USD traded 2.52% higher against the JPY over the past week, closing at 101.54. The USDJPY pushed through the 100 level on Thursday and further strengthened on Friday, as the pair moved past the 101 mark in the morning Asian session. On Friday, the greenback was boosted against the yen after data from Japan’s Ministry of Finance revealed that domestic residents were net buyers of overseas assets in the two weeks to May 4, indicating that the Bank of Japan’s easing program has prompted investors to seek out higher yields overseas to compensate for lower yields on Japanese government bonds. The pair traded at a high of 102.00 and a low of 98.58. The pair is expected to find its first support at 99.42, with the next support expected at 97.29. The first resistance is at 102.83 and the next at 104.12.
Ahead in the week, investors would tap data from Japan on preliminary first quarter GDP, industrial production and machinery orders data.
USD CHF
USD rose 2.24% against the CHF and closed at 0.9570 in the last week. The Swiss Franc backtracked against the greenback and the Euro in initial trading, after data revealed that consumer confidence in Switzerland declined by more than expected for April. Moreover, an expected decline in the unemployment rate failed to provide confidence to Swiss Franc investors. Meanwhile, data released on Wednesday indicated that the Swiss economy continued to face deflationary pressures for April, providing adequate room to the Swiss National Bank to introduce additional easing measures.During the period, the pair traded at a high of 0.9629 and a low of 0.9333. The first support is at 0.9392, and the next at 0.9215. Resistance exists first at 0.9688, and then at 0.9807.
During this week, Swiss producer price inflation, a leading indicator of consumer inflation, as well as data on ZEW economic expectations and retail sales would remain on traders’ radar.
USD CAD
Last week, the USD traded 0.34% higher against the CAD and closed at 1.0114. The Loonie staged a sharp decline against its US counterpart on Friday, after data revealed that Canadian employers added fewer jobs than forecast in April, fuelling concern that the nation’s economic recovery is slowing. Statistics Canada reported that net employment rose by 12,500 jobs and the unemployment rate was unchanged at 7.2%. Earlier during the week, economic data indicated that the pace of purchasing activity in the Canadian economy slowed more sharply than expected in April. USDCAD traded at a high of 1.0154 and a low of 1.0012 in the previous week. The first support is at 1.0033, with the next at 0.9951. The first resistance is at 1.0175, while the next is at 1.0235.
On the economic front, market awaits official data on consumer inflation and wholesale sales, a leading indicator of consumer spending scheduled for release later during the week. Investors also keenly await the release of the Bank of Canada’s quarterly review report ahead in the week.
AUD USD
The Aussie Dollar shed 2.96% against the USD in the last week, and closed at 1.0009, slipping below parity for the first time since June, dropping to as low as 99.61 US cents. Market participants reduced their exposure to the Australian Dollar, after the Reserve Bank of Australia (RBA) lowered its key interest rate by 25 basis points to 2.75% in its monetary policy meeting held during the week. Also, the Australian central bank warned in a report on Friday that the country’s decade-long mining boom is beginning to cool, which may result in more economic pain and higher unemployment going forward. Traders speculated that this opens the door to more interest-rate cuts, which will further diminish the appeal of the domestic currency. During the week, the pair traded at a high of 1.0309 and a low of 0.9961. The first support is at 0.9877, and the next at 0.9745. The first resistance is at 1.0225 and the next at 1.0441.
With no major domestic data scheduled for release during the week, the AUD is expected to closely track economic data from China and the Europe for clarity on risk appetite among market participants.
Gold
In the prior week, Gold traded 1.47% lower against the USD and closed at USD1449.10, as the greenback strengthened, following better than expected labor market data in the US. The yellow metal traded at a high of 1479.07 and a low of 1419.71 in the previous week. Gold is expected to find support at 1419.52 and then at 1389.93. The first resistance is at 1478.88, while the next is at 1508.65.
In the week ahead, gold traders would keep an eye on a flurry of US economic reports, including data on retail sales, building permits, jobless claims as well as a closely watched report on consumer sentiment. Any improvement in the US economic data would further increase speculation of an early exit by the US Fed from its current monetary easing program.
Crude Oil
Oil prices traded 0.44% higher against the USD in the last week and closed at USD96.04, as smaller-than-expected rise in US crude inventories and strong trade data from China helped boost the outlook for oil demand. The US Energy Information Administration reported that crude supplies rose 230,000 barrels for the week ended May 3, against expectations for a 1.9 million-barrel climb. This rise was smaller than the 680,000-barrel increase reported by the American Petroleum Institute on late Tuesday. However, oil prices fell later in the week, after the Organization of Petroleum Exporting Countries (OPEC) reported increased output in April and maintained a flat forecast of global demand. In its April report, the OPEC forecast total average oil demand of 89.7 million barrels per day (bpd), up 0.8 million bpd from 2012, unchanged from its March projection. Also the agency reported that production increased to 30.46 million barrels per day in April, marking the highest level in five months and from 30.18 million bpd in March. Oil traded at a high of 97.17 and a low of 93.37 in the previous week.
Oil has its first major support at 93.88, while the next support exists at 91.73. The first resistance is at 97.68 and the next at 99.33.
Forex Market Update
This morning, the greenback is trading mostly higher against its major peers. The Federal Reserve reiterated its aggressive monetary easing stance in its two-day policy meeting that ended yesterday.
The Euro is trading lower, as markets anticipate an interest rate cut from the European Central Bank (ECB) in its policy meeting scheduled later in the day. Also PMI in Europe confirmed that manufacturing activity continue to be weak across the region despite being revised higher. In France borrowing costs fell after a successful bond auction, with the yield for its benchmark 10-year bond slipping to 1.81%.
Meanwhile, the Organisation for Economic Cooperation and Development stated that Italy’s economy would contract by more than expected this year and its public finances would deteriorate in 2013 and 2014. On the other hand, the newly appointed Italy Prime Minister, Enrico Letta stated that Italy will maintain its deficit commitments.
The Bank of Japan (BoJ), in its minutes for the recently held monetary policy meeting, indicated that there was a broad consensus among board members that it was necessary for the central bank to take more aggressive monetary policy measures to stimulate the economy. However, the policy makers also expressed concerns that such a bold move would obliterate the functioning of financial markets.
The Australian Dollar registered losses after manufacturing data in China came in less-than-expected in April, confirming a fragile recovery in China. Also, data revealed that, the number of building permits in Australia dropped in March, indicating a bleak forecast for construction activity in the nation.
EUR USD
Last week, the EUR traded 0.62% higher against the USD and closed at 1.3109. Initially in the week, the Euro received a boost after Italy ended an almost two-month long political gridlock by forming a coalition government. The Democratic Party deputy leader, Enrico Letta, is the Prime Minister of the coalition, which includes Silvio Berlusconi’s People of Freedom party. In the mid week, the Euro plunged after the ECB cut the main refinancing rate by 25bps to 0.50% and as the ECB Chief, Mario Draghi hinted that the central bank has an open mind with regard to negative deposit rates. However the following day, the ECB member, Ewald Nowotny commented that the markets were “over-interpreting” the earlier statement on negative interest rates by the central bank Chief. This aided trading sentiment towards the Euro and helped the Euro in recovering its losses. On the data front, manufacturing PMI data across Europe showed some improvement for April, though it still remains in the contraction phase. Additionally, inflation in the Euro-zone fell to a three-year low while unemployment rose to a record high. During the week, the pair traded at a high of 1.3244 and a low of 1.3031.
The pair is expected to find its first support at 1.3012, with the next support expected at 1.2915. The first resistance is at 1.3225 and the next at 1.3341.
GBP USD
In the last week, GBP traded 0.5% higher against the USD and closed at 1.5565, on the back of reports showing an improvement in the UK manufacturing, construction and housing sectors. In economic news, the UK construction PMI came in better than expected at 49.4 in April, surpassing expectations for a reading of 48.0. Adding to the positive tone, the UK manufacturing PMI improved to 49.8 in April from 48.6 in March. Further boosting sentiment, UK’s services sector recorded its strongest growth, adding to signs that the slow economic recovery may be gaining some traction. On the housing front, house prices rose 0.9% from a year earlier, the biggest annual increase in 14 months, indicating that the nation’s housing activity is garnering momentum. Also, mortgage approvals in the UK climbed more than expected for March. However, early in the week, the GfK indicated that confidence among British consumers declined to -27 in April from -26 in March, the weakest level since December. The pair traded at a high of 1.5608 and a low of 1.5468 in the previous week.
GBPUSD is expected to find its first support at 1.5486, with the next at 1.5407. Resistance exists first at 1.5626, and then at 1.5687.
USD JPY
The USD traded 0.85% higher against the JPY over the past week, closing at 99.04, on signs that the US recovery is gathering pace. On Friday, the pair traded through the 99.00 mark, following upbeat nonfarm payrolls data and amid an unexpected fall in the US unemployment rate. Moreover during the week, the minutes of the Bank of Japan’s latest monetary policy meeting revealed that there was a broad consensus among board members that it was necessary for the central bank to take more aggressive monetary policy measures to end the long bout of deflation. Data released in Japan showed that industrial production growth slowed in March, while retail sales fell further. However, Japan’s unemployment fell to 4.1% for March, the lowest in more than four years. The pair traded at a high of 99.30 and a low of 97.00.
The pair is expected to find its first support at 97.59, with the next support expected at 96.14. The first resistance is at 99.90 and the next at 100.75.
USD CHF
USD traded 0.72% lower against the CHF and closed at 0.9360 in the last week. In Switzerland, the manufacturing sector returned to expansion in April, with the SVME PMI rising to a reading of 50.2 in April, from a reading of 48.3 recorded in the previous month. In a separate report, the UBS real estate bubble index in Switzerland rose to a reading of 1.17 in the Q1 2013, from a reading of 1.11 in the previous quarter. Over the weekend, Swiss National Bank’s Vice President, Jean-Pierre Danthine stated that the central bank’s currency cap remains necessary, and that the central bank would not exclude taking further steps should the crisis in the euro area intensify. During the period, the pair traded at a high of 0.9433 and a low of 0.9246.
The first support is at 0.9260, and the next at 0.9159. Resistance exists first at 0.9447, and then at 0.9533.
USD CAD
Last week, the USD traded 0.89% lower against the CAD and closed at 1.0079. The Canadian Dollar paced gains following the release of stronger-than-expected Canadian gross domestic product data that showed economic growth gained momentum in February. Gains in CAD were also supported by reports that the international merchandise trade balance in Canada unexpectedly swung to a surplus for March, buoyed by a sharp rise in exports, after eleven consecutive months of deficits. In a key development, Stephen Poloz, head of Export Development Canada, has been named as the next Bank of Canada governor. USDCAD traded at a high of 1.0171 and a low of 1.0049 in the previous week.
The first support is at 1.0028, with the next at 0.9978. The first resistance is at 1.0150, while the next is at 1.0222.
AUD USD
AUD traded 0.31% higher against the USD in the last week, and closed at 1.0314, following improved risk appetite among investors. Gains in the Aussie Dollar remained capped as China’s official manufacturing PMI confirmed a slowdown in manufacturing activity. Meanwhile, in releases this morning, the Chinese services PMI also indicated a slowdown in activity in April. On the domestic front, the Australian manufacturing activity plunged to a four year low in April, while the number of Australian home building permits fell sharply in March. On the other hand, the producer price index in Australia rose 1.6% (YoY) in the 1Q 2013, compared to a 1.0% rise recorded in the previous quarter. During the week, the pair traded at a high of 1.0387 and a low of 1.0221.
The first support is at 1.0228, and the next at 1.0141. The first resistance is at 1.0394, and the next at 1.0473.
Gold
In the prior week, Gold traded 0.59% higher against the USD and closed at USD1470.75, amid expectations that the central banks around the world would maintain their monetary stimulus policies. Gold received a boost after the European Central Bank cut its interest rate for the first time in 10 months on Thursday. Prices also rose after the Federal Reserve announced that it remained committed to maintain interest rates at record lows and continue buying bonds to support the US economy. This week, traders await interest rate decisions by the Reserve Bank of Australia and the Bank of England for further cues on where monetary policy is headed globally. The yellow metal traded at a high of 1488.09 and a low of 1440.57 in the previous week.
Gold is expected to find support at 1444.85 and the next at 1418.95. The first resistance is at 1492.37, while the next is at 1513.99.
Crude Oil
Oil prices traded 2.94% higher against the USD in the last week and closed at USD95.54, as upbeat US initial jobless claims and trade deficit data raised demand prospects for crude oil in the world’s top oil consumer. On the inventory front, the EIA reported that crude oil inventories climbed 6.7 million barrels in the week ended April 26, surpassing expectations for an increase of 1 million barrels. Additionally, the American Petroleum Institute (API) reported that crude supplies advanced 5.2 million barrels, in the week ended April 26. Oil traded at a high of 96.04 and a low of 90.11 in the previous week.
Oil has its first major support at 91.75, while the next support exists at 87.97. The first resistance is at 97.68, and the next at 99.83.
Weekly Forex Update
The greenback held an upper hand against its key counterparts, as uninspiring data from China early in the week rattled market sentiment. Chinese economic growth slowed unexpectedly in the first quarter of 2013, while industrial production came in lower than expected. Also, Moody’s lowered China’s credit outlook to ‘Stable’ from ‘Positive’, citing lack of necessary progress in reducing risks from local-government debt and credit expansion.
The gains in the Dollar were capped, after the Minneapolis Fed President, Narayana Kocherlakota, and the Vice Chairman of the Federal Reserve (Fed), Janet Yellen, voiced support for continuation of monetary easing program. Meanwhile, economic data in the US was mixed.
The Euro started the week lower, as disappointing economic data from China dented investor sentiment. Additionally, reports that German political party, known as the Alternative for Germany, which intends to take Germany out of the Euro, is gaining support, further pushed the Euro lower. Also, the IMF forecasted the region’s economy to shrink more than projected earlier. The Euro tumbled further, on back of dovish comments by the Bundesbank President, Jens Weidmann, that there was a possibility of an interest rate cut in the Euro-zone. However, losses were trimmed, after he indicated at end of the week that rate cuts were only possible if economic data prompted it. Separately, over the weekend, the European Central Bank (ECB) President, Mario Draghi, stated that economic situation in the Euro-zone has not improved since the central bank’s meeting held on 4th April.
The UK Pound declined against the greenback, amid weak unemployment data from the UK. The Bank of England’s (BoE) minutes revealed that policymakers remained divided on extending the quantitative easing (QE) program. Additionally, retail sales in the UK showed disappointing numbers, thus pushing the Pound lower. Meanwhile, Fitch has downgraded UK’s credit rating to ‘AA+’ from ‘AAA’, citing weaker economic and fiscal outlook.
Among the Asian currencies, the Yen traded higher earlier in the week, after economic indicators showed that trade deficit in Japan narrowed in March. However, the gains were reversed, after Japan received G-20 support on its current monetary policy.
The commodity sensitive Canadian Dollar witnessed drop in the last week, after the Bank of Canada (BoC) trimmed its forecast for the nation’s economy. The Australian Dollar suffered losses earlier in the weak, amid poor Chinese GDP and industrial production data. However, it gave up its losses in the latter part of the week, buoyed by upbeat domestic economic data.
EUR USD
Last week, the EUR traded 0.14% lower against the USD and closed at 1.3062. The Euro started the week lower, as risk aversion increased, amid disappointing Chinese data, and following news that the newly founded Alternative for Germany, is gaining strength. A cut in IMF’s growth projection for the nation pressurized the Euro, while reports that Greece and the Troika had reached an agreement which would fetch Greece a €2.8 billion loan tranche and another €7.2 billion for the recapitalization for its banks lent support to the currency. Losses were also trimmed after the Bundesbank President, Jens Weidmann stated that rate cuts in the region were only possible if data worsened, providing support to the Euro. On the macro front, the ZEW indicator of economic sentiment index in Germany declined to 36.3 in April, while the current economic situation index declined to a reading of 9.2 in April. In the Euro-zone, consumer price inflation eased to 1.7% in March, followed by a drop in construction output. During the week, the pair traded at a high of 1.3202 and a low of 1.3001. The pair is expected to find its first support at 1.2975, with the next support expected at 1.2887. The first resistance is at 1.3176, and the next at 1.3289.
The pair is expected to trade on the cues from the release of manufacturing and service sector activity data from the Euro-zone and Germany later in the week.
GBP USD
In the last week, GBP traded 0.73% lower against the USD and closed at 1.5232, after unemployment rate in the UK rose to 7.9% in March from 7.8% in February. Disappointing retail sales in the UK also weighed on the Pound. Additionally, minutes of the last BoE meeting showed that policymakers remained split over monetary policy, with only three out of nine policy members voting to increase bond buying program. On Friday, the Pound tanked 0.33% against the greenback, after Fitch Ratings stripped UK’s long-term foreign and local currency issuer default ratings one step to “AA+” from “AAA”. The pair traded at a high of 1.5386 and a low of 1.5216 in the previous week. GBPUSD is expected to find its first support at 1.5170, with the next at 1.5108. Resistance exists first at 1.5340, and then at 1.5448.
The gross domestic product in the UK to be released later this week, is likely to set tone for the pair, as market participants would check whether the data managed to dodge contraction in Q12013 and escape a triple dip recession.
USD JPY
The USD traded 0.66% higher against the JPY over the past week, closing at 99.55. The Yen found support after trade balance logged the narrowest deficit for nine months, at ¥362.4 billion in March, from a downwardly revised deficit of ¥779.5 billion in February. Meanwhile, consumer confidence index in the nation rose for the third successive month to a reading of 44.8 in March from a reading of 44.2 in February. The gains were pared, after Japanese monetary policies were unopposed in G-20 meeting in the US. The pair traded at a high of 99.70 and a low of 95.80. The pair is expected to find its first support at 97.00, with the next support expected at 94.45. The first resistance is at 100.90, and the next at 102.25.
The BoJ interest rate decision is likely to receive increased market attention in Japan in the week.
USD CHF
USD traded 0.38% higher against the CHF and closed at 0.9333 in the last week. In Switzerland, producer and imports prices declined 0.3% (YoY) in March, compared to a 0.1% rise in the previous month. Additionally, the ZEW survey indicator of economic expectations index rose to a reading of 20.0 in April, compared to a reading of 2.3 in the previous month. The Swiss National Bank’s governing board member, Fritz Zurbruegg, stated that Swiss Franc remains highly valued against the Euro and a further appreciation would harm the economy. Meanwhile, the Swiss National Bank (SNB) Chairman, Thomas Jordan indicated that the Swiss National Bank’s exchange rate cap is still essential. During the period, the pair traded at a high of 0.9340 and a low of 0.9205. The first support is at 0.9245, and the next at 0.9158. Resistance exists first at 0.9380, and then at 0.9428.
Trading trends in the pair are expected to be determined by economic release of UBS consumption indicator in Switzerland ahead in the week.
USD CAD
Last week, the USD traded 1.24% higher against the CAD and closed at 1.0264. The Loonie came under pressure after the Bank of Canada’s (BoC) lowered its 2013 economic growth forecast to 1.5% from the previous estimate of 2.0% and voted to maintain interest rates at 1.0% in April. In Canada, manufacturing shipments rose 2.6% (MoM) to C$49.6 billion in February, compared to a 0.6% decline in January. Market had expected manufacturing shipments to increase by 0.6% in February. Additionally, the consumer price index (CPI) in Canada rose 0.2% (MoM) in March, compared to a 1.2% rise in February. USDCAD traded at a high of 1.0295 and a low of 1.0134 in the previous week.
The first support is at 1.0167, with the next at 1.0070. The first resistance is at 1.0328, while the next is at 1.0392.
AUD USD
AUD traded 2.10% lower against the USD in the last week, and closed at 1.0281, amid poor economic data from Australia and China. Gross domestic product (GDP) in China expanded 1.6% (QoQ) in the first quarter of 2013 compared to a 2.0% expansion expected by markets. Additionally, industrial production growth in China slowed in March. The Aussie fell further, after the RBA minutes of monetary policy meeting on 2nd April revealed that policymakers opined that the inflation outlook makes it possible to cut rates and that the Australian Dollar remained high. However, losses were capped, after housing prices and foreign direct investment in China showed a rise in March. Further supporting the Aussie was upbeat Australian economic data showing that National Australia Bank’s business confidence index rose in the first quarter of 2013. During the week, the pair traded at a high of 1.0526 and a low of 1.0267. The first support is at 1.0190, and the next at 1.0099. The first resistance is at 1.0449, and the next at 1.0617.
Data slated this week includes consumer price index in Australia.
Gold
In the prior week, Gold tanked 5.21% against USD and closed at USD1403.85, following reports that the Cyprus government plans to sell part of its gold reserves in the coming months. The news triggered speculation among traders that central banks around the world would reduce their gold reserves. However, the Bombay Bullion Association reported that gold imports in India, world’s major gold consumer, would surge 20% to around 183.6 tonnes in the April-June quarter triggered by weak prices. The yellow metal traded at a high of 1495.75 and a low of 1321.95 in the previous week.
Gold is expected to find support at 1318.62 and the next at 1233.38. The first resistance is at 1492.42, while the next is at 1580.98.
Crude Oil
Oil prices traded 3.12% lower against USD in the last week and closed at USD88.01. Oil prices declined, as weak economic data from China and the US, world’s largest crude consumers, raised demand concerns. However, oil prices gained after the American Petroleum Institute (API) indicated that crude supplies declined 6.7 million barrels for the week ended April 12. Meanwhile, the Energy Information Administration (EIA) reported that, for the week ended April 12, crude supplies fell 1.2 million barrels. Oil traded at a high of 90.73 and a low of 85.61 in the previous week.
Oil has its first major support at 85.50, while the next support exists at 83.00. The first resistance is at 90.62, and the next at 93.24.
Weekly Forex Update
The greenback traded lower against key currencies last week. Losses in the US dollar were capped after the minutes of Federal Open Market Committee’s (FOMC) meeting held on 20th March, showed that policymakers remained divided over whether to continue with or wind-up the asset purchase program earlier. The minutes also showed that a number of FOMC members saw quantitative easing tapering around midyear and to stop by end of 2013. However, the greenback declined later again as upbeat US jobless claims data eased fears about deterioration in the US labor market and boosted risk appetite. However, losses were capped, as weak US macroeconomic data on Friday led by an unexpected decline in retail sales and a significant deterioration in consumer sentiment fuelled worries about the US economic recovery.
The Euro received a positive start to the week, as encouraging trade and current account balance data from Germany eased worries of recession in the region. Further supporting the shared currency was speculation that central banks across the world would continue with their monetary stimulus programmes to support economic growth. However, gains were capped in the middle of the week, as the greenback rose following release of the US FOMC minutes. Meanwhile, over the weekend, Euro-zone finance ministers agreed to support the €10 billion bailout for Cyprus. Demand for the Sterling was boosted, as positive industrial and manufacturing production data from the UK eased concerns of triple dip recession in the country.
The Yen remained under pressure against the greenback, on back of the Bank of Japan’s (BoJ) asset purchases to beat deflation and spur economic growth. The Japanese currency declined further after the BoJ Governor, Haruhiko Kuroda, reiterated his stance that the central bank would not set a time limit for easing. In a separate report released during the weekend, the US Treasury Department stated that it would pressurize Japan to refrain from competitive devaluation.
The Aussie rallied against the greenback amid inspiring imports data from China, the country’s largest trading partner. However, the rally was capped, after economic reports showed a rise in unemployment rate and loss of jobs in Australia well above market expectations.
Gold prices tumbled after a leading broker downgraded its price forecast on the precious metal. Additionally, the division within the Fed on continuing the bond buying programme beyond this year and news that Cyprus would dispose its gold reserves to contribute to the country’s bailout pressurized the yellow metal.
EUR USD
Last week, the EUR traded 0.52% higher against the USD and closed at 1.3080. The Euro started the week with a positive tone, buoyed by positive economic data from the region. Industrial Production in Germany rose better-than-expected in February, while trade and current account surplus in the nation widened in February. However, gains were trimmed in the middle of the week, as the greenback spiked up after Federal Reserve minutes showed that officials remained divided over how long the central bank should continue with its asset purchase program. Meanwhile, over the weekend, Euro-zone finance ministers at a meeting in Dublin backed the €10 billion bailout for Cyprus. During the week, the pair traded at a high of 1.3139 and a low of 1.2968. The pair is expected to find its first support at 1.2986, with the next support expected at 1.2891. The first resistance is at 1.3157, and the next at 1.3233.
In the week ahead, data coming out from the Euro-zone includes consumer price index, construction output and current account balance.
GBP USD
In the last week, GBP traded marginally higher against the USD and closed at 1.5344, as upbeat industrial and manufacturing production data from the UK receded fears of the nation falling into a triple-dip recession. Industrial production in the UK recovered at a faster-than-expected pace in February, while manufacturing production rebounded in February following a slump in the previous month. Meanwhile, goods trade deficit in the UK worsened in February. Additionally, economic data released at end of the week showed that the conference board (CB) leading index in the UK rose 0.4% in March, following a similar rise in February. The pair traded at a high of 1.5413 and a low of 1.5239 in the previous week. GBPUSD is expected to find its first support at 1.5251, with the next at 1.5158. Resistance exists first at 1.5425, and then at 1.5506.
The BoE minutes are likely to receive increased market attention, along with other economic releases due later in the week.
USD JPY
The USD traded 1.24% higher against the JPY over the past week, closing at 98.89.The Yen came under heavy selling pressure after the BoJ began buying ¥1.2 trillion worth of long-term government bonds under its new monetary easing program to boost economic growth. Separately, the minutes of BoJ monetary policy meeting held on 6thand 7thMarch revealed that the board members are of the view that economic conditions in Japan have stopped deteriorating although some uncertainty still persists and the economy is expected to rebound to a moderate recovery path. Further weighing on the Yen were comments by the BoJ Governor, Haruhiko Kuroda, that the central bank would not set a time limit for easing. The pair traded at a high of 99.96 and a low of 98.29. The pair is expected to find its first support at 98.13, with the next support expected at 97.38. The first resistance is at 99.80, and the next at 100.71.
The pair is expected to trade on the cues from the release of trade balance data, adjusted merchandise trade balance, and all industry activity index later in the week.
USD CHF
USD traded 0.34% lower against CHF and closed at 0.9298 in the last week. In Switzerland, industrial production increased at a slower rate in the fourth quarter of 2012. Additionally, consumer prices growth slowed, while unemployment rate remained steady at 3.1% in March. During the period, the pair traded at a high of 0.9368 and a low of 0.9277. The first support is at 0.9261, and the next at 0.9223. Resistance exists first at 0.9352, and then at 0.9405.
The Swiss Franc is expected to trade on cues from release of producer and import prices and trade balance data from Switzerland ahead in this week.
USD CAD
Last week, the USD traded 0.36% lower against the CAD and closed at 1.0138, as risk appetite improved. The greenback traded higher after the FOMC minutes showed that there was some reluctance among some members of Federal Reserve to extend the bond buying program after 2013. However, better-than-expected global economic data in the middle of the week boosted the CAD. The greenback crept up again after economic data released at end of the week showed that slump in consumer sentiment and retail sales in the US, sparked fresh concerns over the strength of the country’s economic recovery. In Canada, the Bank of Canada’s (BoC) business outlook survey indicated that the overall business lending conditions during the Q12013 dropped largely, reflecting lower demand from corporate borrowers. USDCAD traded at a high of 1.0216 and a low of 1.0081 in the previous week. The first support is at 1.0074, with the next at 1.0010. The first resistance is at 1.0209, while the next is at 1.0280.
Investors are eying BoC interest rate decision, followed by release of consumer price index and wholesale sales in the nation this week.
AUD USD
AUD traded 1.10% higher against USD in the last week, and closed at 1.0501. The Aussie started the week on a negative note, after survey results by the Australian Industry Group (AiG) showed that construction sector activity in Australia fell sharply in March. However, the losses were reversed after economic reports showed that Chinese imports surged in March, a positive news for the Australian economy as it is China’s largest trading partner. However, the gains were limited, amid release of Australian unemployment data. Unemployment rate in Australia rose to 5.6% in March from 5.4% in the previous month. The Australian economy lost 36,100 jobs in March compared to a loss of 7,500 jobs forecasted by markets. During the week, the pair traded at a high of 1.0584 and a low of 1.0350. The first support is at 1.0373, and the next at 1.0244. The first resistance is at 1.0607, and the next at 1.0712.
On the economic landscape this week, are RBA’s minutes of last meeting, along with the release of the Westpac leading index in the nation.
Gold
In the prior week, Gold traded 6.34% lower against USD and closed at USD1481.02.Gold prices came under pressure, after a leading broker downgraded its price forecast on the precious metal. Additionally, the minutes of the US Federal reserve meeting failed to indicate a time line on how long the quantitative easing (QE) program would continue. Gold losses accelerated after news emerged that Cyprus would dispose its gold reserves to contribute to the country’s bailout. The yellow metal traded at a high of 1590.46 and a low of 1478.20 in the previous week.
Gold is expected to find support at 1442.66 and the next at 1404.30. The first resistance is at 1554.92, while the next is at 1628.82.
Crude Oil
Oil prices traded 2.18% lower against USD in the last week and closed at USD90.84. Prices declined after the US Energy Information Administration (EIA) cut its world oil demand forecast for 2013 by 50,000 barrels per day to 960,000 bpd. Also, the International Energy Agency (IEA) lowered its global oil demand outlook in 2013, citing weaker fuel usage in industries, further weighing on oil prices. Oil prices were also impacted by poor retail sales and consumer sentiment data in the US, fuelling worries that the US economic recovery is losing momentum. Separately, the American Petroleum Institute (API) reported that oil inventories rose 5.1 million barrels for the week ended 5th April. Additionally, the US Energy Information Administration (EIA) reported that, crude oil supplies increased 0.3 million barrels for the week ending 5th April. Oil traded at a high of 94.82 and a low of 90.27 in the previous week.
Oil has its first major support at 89.13, while the next support exists at 87.43. The first resistance is at 93.68, and the next at 96.53.