Weekly Recap: Mixed Results

The week in the hindsight offered a lot in terms of macro news, albeit the FOMC March 18 meeting minutes stole the limelight which surprised markets coming in slightly hawkish than markets’ expectations. The US dollar emerged as a clear winner gaining nearly 3% across the board, while the shared currency stood the weakest among the majors, recording about 4% loss on the week.

A propos to the review of the past week’s macro ideas, we published three reports – first under JPY forecast, second report under Gold Forecast and the last one under CAD Forecast, displayed mixed results.

The first macro report titled “Gold Forecast: USD 1200 – A Key Reversal Point ?” published on April 7.The analysis and projections expected gold prices to test USD 1200 levels and rebound from that levels higher to 1223-1225 was anticipated. However, the idea was contingent on the Fed’s minutes release to come out dovish echoing Fed’s March 18 meeting statement.

However, the minutes release on April 8 surprised markets on the upside and turned out to be more hawkish than dovish as the Fed minutes showed a split of FOMC members regarding a June rate hike. Gold prices slipped below USD1200 for the first time last week on FOMC minutes release after traders got a glimpse inside last month's policy debate at the Federal Reserve. Gold prices tumbled to 1197 levels as the latest FOMC minutes re-ignited June hate hike expectations driving treasury yields higher which in turn dull the demand for the yellow metal as a higher yielding asset.

The second report titled “USD/JPY Forecast: Technically, a swing back to 120.30 expected ahead of FOMC minutes” published on April 8.The idea worked exceptionally well and the anticipated view that USD/JPY would halt its downslide and reverse from 119.63 levels, swinging back higher above 120 levels and retest 120.30 levels met expectations.

The USD/JPY pair, in fact reversed from around 119.70 levels and rose higher surpassing 120 levels ahead of FOMC minutes as anticipated. The pair accelerated gains beyond 120 barrier and reached highs at 120.36 on FOMC minutes which revealed June might be more in the cards than markets are pricing, supporting a bid tone to greenback and was viewed as more hawkish by market participants.

As anticipated in the report, “it’s expected that USD/JPY may rebound from lows and retest 120 barrier (ahead of FOMC minutes)and beyond that the pair is likely to rise to 120.30 highs seen at Tokyo open today.”

Finally, the third report titled “USD/CAD Forecast: Likely to test 1.2400 on upbeat Canada's housing data & bearish US jobs data” also worked as per expectations and the report was subject to Canadian housing data coming in better than forecast and the US data missing forecast. However, both the data surprised markets coming in contrary to market expectations. Canada's building permits declined to the lowest level in almost a year, falling for the second consecutive month in February. The number of Americans filing new claims for jobless benefits rose less than expected last week and the four-week moving average of claims hit its lowest level since 2000.

On data release, USD/CAD bounced-back sharply and rose to daily highs of 1.2667 beyond a break of 1.26 barrier as anticipated. Hence, our view, “if Canadian housing data and the US figures comes out in line with expectations or misses expectations, USD bulls may take charge and the pair is likely to pierce through 50-DMA at 1.2564 resistance and test 1.26 barrier, beyond which the pair may shoot to 1.2655 (April 2 High) levels,” played out fairly well.

In the week ahead, for further US Dollar moves we have Tuesday’s report on U.S. retail sales, as well as Friday’s reports on inflation and consumer sentiment. The U.S. is also due to produce data on industrial production, building permits and housing starts throughout the week.