A busy week just past leaving the market barely changed overall and the greenback more than 1% lower against the G10 basket on a series of disappointing data. The Japanese yen was the biggest gainer of the week following Bank of Japan’s policy meeting.

USDEUR

U.S. GDP Growth at two-year low; Dollar Broadly Lower
The dollar is about to end the week significantly lower against the majors as the economic indicators coming out are bad for the economy. The U.S. economic growth slowed down to the slowest pace in two years in Q1 as the consumer spending weakened and the strong dollar didn’t underpin exports. The GDP rose by 0.5% annualized, the lower since Q1 2014 versus 0.7% expected and 1.4% the previous quarter.

U.S. GDP Growth

Following Fed’s meeting on Wednesday, where no changes took place, the Fed signalled that has no rush to raise interest rates and the Fed Chair Janet Yellen avoided to comment on the time of the next rate hike, leaving the U.S. dollar indifferent. The committee continues to eye the economic indicators and the labour market conditions that have improved further even as growth slowed down. The household spending growth moderated but household real income has risen at a solid rate and consumer sentiment remains high. The policymakers also lowered their perspective on consumer prices growth as the inflation rate remains weak.

During the week, other news came out that helped dollar’s depreciation. The U.S. Durable Goods Orders were soft in March, rose by 0.8% versus 1.8% the market expectation. The growth of the services sector increased to 52.1 in April from 51.3 before, according to the Markit PMI, however, it also disappointed as the market consensus was for a bigger growth of 52.3. The Consumer Confidence declined to 94.2 in April from 96.0 expected.

EUR

Euro traders expect CPI and Unemployment Rate
Euro has been in calm session this week with smattering low-level data out that didn’t affect the market significantly. The IFO Survey revealed that Expectations and Business Climate was softer than expected in April as well as the Current Assessment. Contrary, Eurozone’s as a whole indicators for April revealed a better than expected confidence in various sectors helping the single currency to keep its earliest gains. The Services Sentiment increased to 11.5 versus 10.0 expected and 9.6 before. The Industrial Confidence, even though it remained in the negative territory, improved to -3.7 from -4.2 before. The Economic Sentiment also rose at 103.9 versus 103.0 before while the Consumer Sentiment remained stable at -9.3.

Today, the euro traders will eye Eurozone’s flash inflation rate for April that is closely eyed by policymakers and the unemployment rate that is not expected to change from the record low of 10.3%. The consumer price index is forecasted to suffer a drop of 0.1% in April from zero before.

Eurozone Inflation Rate

EUR/USD – Technical Outlook
The EUR/USD pair surged above the significant level at 1.1300, which coincides with the 50-SMA and the 200-SMA on the 4-hour chart and it now seems ready to continue its upward movement. At the time writing, the pair is testing the critical level at 1.1400 and a break above here would open the way towards the significant zone at 1.1454 – 1.1465. Above the year high would see a run back to the ultimate target at 1.1500.

GBP

Pound Virtually Unchanged for the Week
The British Pound had a choppy week but remained unchanged against the majority of the G10 currencies. The only exceptions were the greenback which fell on weak data, yen that rose sharply following the domestic policy meeting and the Aussie that sank after CPI disappointed.

The main drivers of the pound this week was the Brexit worries that started to gloom as the polls turn in favor of UK staying in the European Union and the GDP growth. On Monday as the UK Prime Minister David Cameron and the U.S. President Barack Obama stated their support for Britain to remain in the European Union. The perspective that Britain will vote to stay in the union supports strongly the pound. The UK economy kept the same rate of growth as the last quarter of 2015 at 2.1% year-over-year while the market had predicted a slight slowdown at 2.0%. On a quarterly basis, the GDP growth met forecasts of 0.4% down from last quarter’s growth of 0.6%, as the services sector which accounts for 50% of the growth increased by 0.6% while the industrial production, construction, and agriculture shrank the first three months of the year.

GBP/USD – Technical Outlook
The pound surged above the psychological level of 1.4500 against the dollar the previous week and touched the 1.4637 on Wednesday. The GBP/USD pair ended March with gains of 3.2% and is trading up 2.05% a day and a half before the end of April. In terms of levels, the pair could find resistance from the 200-period SMA on the daily chart around 1.4750, while below this level it should find further support around 1.4680, before reaching the former level. Above here, the weekly 50-SMA is ready to provide a significant resistance around the 1.5000 area, which I think is the next target for the medium term traders.

Japanese yen Rises as on Positive Data
The Japanese yen gained significant ground against its counterparts following the Bank of Japan policy meeting and the optimistic results came out and USD/JPY is on track to end the week more than 4% lower while EUR/JPY is down 2.70% for the week.

The Bank of Japan left the interest rate unchanged despite the high probabilities of a rate cut, but the decision that shocked the market was the position of the policymakers against to fresh stimulus measures. The economy is facing some hardships and stagnating growth and the central bank will continue its negative rate policy and voted to keep its massive asset purchase scheme unchanged, however, no fresh measure will be taken to push the economy further. The unemployment rate fell to 3.2% in March below the market consensus to remain at 3.3% and the preliminary estimate of Industrial Production in March showed a more than expected growth. On the other hand, the country fell to 0.1% deflation in March from positive inflation rate of 0.3% before.

USD/JPY – Technical Outlook
The USD/JPY pair has been looking weak over the last couple of days, following the aggressive sell-off which started after the BoJ policy meeting few days ago. The pair closed down -6.90% in February, -0.10% in March and is now ready to snap a third consecutive negative month, currently -4.80% down for April. The weekly performance also in negative -4.20%, following two positive weeks of total gains of 2.80%. The short-term charts, as well as the medium term charts, continue to be negative. On the daily chart, the 50-SMA is moving below the 200-SMA and both above the price while the same happens on the 4-hour chart. The momentum indicators generally look negative and so if further losses are seen, as suggested during yesterday’s report, then below 107.25 could see an advance towards 105.45, which coincides with the 200-SMA on the weekly chart. With the above in mind, I would expect the selling pressure to continue in this pair.

USDJPY

Gold – Huge Profits Locked!
Finally, the precious metal surged above the $1,271 and poised for its biggest weekly rise since January 31, as the greenback tumbled after the BoJ and the Federal Reserve stood pat on policy. For the week, the precious metal is up 3.5% and a day before the end of April is up 3.5%. It should be noted that the metal is up 20% since the start of 2016!

In the last three reports we insisted for strong bullish positions following the triangle formation formed on the 4-hour and the daily chart. At last, the move came after the yellow metal rebounded aggressively from $1,242, a level that we considered a significant level the last 2 weeks, since it coincides with the 50-SMA and the 200-SMA on the 4-hour chart and the 50-SMA on the daily. The precious metal surged above the $1,271 during yesterday’s session and is now ready to test the critical level at $1,283 (March 2016 & December 2014 highs). With the above in mind, we remain strong bullish on gold targeting the ultimate $1,300 level!

XAUUSD

U.S. Indices in Red for the Month! Apple Tumbled
The U.S. indices tumbled on Thursday and are about to end the week negative after two consecutive winning weeks. Dow has the worst day over the last two months with losses of 1.17% at 17,830.76, dragged down by Apple Inc. (NASDAQ: AAPL) that plunged by 3.06% to 94.83 following its earnings report that missed the forecasted gains by 1.5B. It’s worth noting that all of the 30 blue-chip indices ended the day in red.

The S&P500 index slumped by 0.92% at 2,075.81 on Thursday with nine out of the 11 S&P 500 sectors to record losses. The leading declines come from the Financial Services sector that plunged by 1.90%. However, both the Dow and the S&P500 are on track to end April with gains more than 0.80% each. Nasdaq also recorded a drop of 1.19% at 4,805.29 for the day and 1.33% down for the month.

Weekly U.S. Market Summary

Economic Indicators
During the morning, the German Retail Sales for March will be released. In the UK, the Mortgage Approvals for March are expected. In Eurozone, three leading indicators will hog the limelight. March’s unemployment rate will be out, no changes are expected at the record low 10.3% level has been in February. The flash inflation rate for April is expected to show a contraction of -0.1% versus a flat month before. The flash figure of the first quarter’s GDP is predicted to show an expansion of 1.4% versus 1.6% the last quarter of 2015. In U.S., the Personal Consumption Expenditures and the Personal Spending for March will be released. In Canada, February’s Gross Domestic Product will come out. Later in the day, the U.S. University of Michigan Consumer Sentiment Index for April will be out.


 

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