AUD Weekly Market Watch 29/09/2014


Last Week recap

EUR/USD Extended its losses last week, trading at a level not seen since November of 2012. The rate was pressured by expectations of tightening by the Federal Reserve, the beginning of additional stimulus measures in the Eurozone, and mixed data from both economies. The rate began the week rising fractionally on Monday after U.S. Existing Home Sales came out at +5.05M versus +5.21M expected and despite comments from ECB President Draghi, who said that, “The economic recovery in the euro area is losing momentum. Following some moderate expansion in recent quarters, growth of the euro area real GDP came to a halt in the second quarter of this year. The early information on economic conditions which we received over the summer has been somewhat weaker than expected.” The pair then made its weekly high of 1.2900 on Tuesday after mixed PMI data; German Flash Manufacturing PMI showed a reading of 50.3, versus an expected print of 51.3, while French Manufacturing PMI showed a reading of 48.9 versus 47.1 expected. On Wednesday, the rate began heading south after comments from Draghi, who said that rates in the EZ would “remain accommodative for a long time” and German Ifo Business Climate, which printed at 104.7, missing expectations of a reading of 105.9, while U.S. New Home Sales rose to +504K from a revised +427K and beating the consensus of +432K. The rate continued declining on Thursday after Dallas Fed President Richard Fisher in a conference in Rome said that markets had priced in the Fed raising interest rates between spring and summer of next year. Nevertheless, he pointed out that a rate hike could occur "sooner rather than later".  Thursday economic data had U.S. Core Durable Goods, which increased +0.7% m/m, in line with expectations, while Durable Goods Orders declined -18.2% compared to an expected decline of -17.7%. Also out was EZ M3 Money Supply, which increased +2.0% y/y versus +1.9% expected. The pair then made its weekly low of 1.2676 after U.S. Final GDP increased +4.6% q/q, as widely anticipated, while GfK German Consumer Climate printed at 8.3 versus 8.5 anticipated, which brought EUR/USD to close at 1.2682, showing an overall decline of -1.1% for the week.

USD/JPY Gained fractionally last week as Japan reported lower than expected economic data and after mixed data out of the United States. The week began with the pair declining on Monday after the OECD’s Acting Chief Economist, Rintaro Tamaki said that consumer inflation in Japan wouldn’t achieve the 2% target “in a stable manner” by Spring of 2015. He also urged the BOJ to maintain monetary easing, “beyond that as early as possible, considering the next tax hike in October 2015.” The rate then made its low of 108.24 on Tuesday before consolidating at a slightly higher level, after speeches by the FOMC’s Kocherlakota and Powell. On Wednesday, the rate continued higher after U.S. New Home Sales came in better than expected, and Japanese Flash Manufacturing PMI, which came out with a reading of 51.7 versus 52.5 expected. The rate then declined on Thursday after mixed U.S. Durable Goods Orders data. Friday saw the pair make its weekly high of 1.0953 after Health Minister Yasuhisa Shiozaki said that the Japanese government had no intention of postponing the law change on the ¥1.2T Government Pension Investment Fund. Also supporting the rate were Japanese Tokyo Core CPI, which increased +2.6% y/y versus +2.7% anticipated, while National Core CPI slowed to +3.1% y/y from a previous +3.3% and missing expectations of a +3.2% reading. USD/JPY went on to close at 109.27, with an overall weekly gain of +0.2%.

GBP/USD Declined a fraction last week as the UK reported lower than expected economic numbers, with mixed numbers out of the United States. The week began on a positive note, with Cable gaining on Monday after lower than expected U.S. Existing Home Sales. The pair then made its weekly high of 1.6414 on Tuesday despite UK BBA Mortgage Approvals showing an increase of +41.6K versus +42.9K expected, also out was UK Public Sector Net Borrowing, which increased +10.9B versus +10.3B expected. Cable then weakened on Wednesday after better than expected U.S. New Home Sales. The rate continued lower on Thursday after UK Realized Sales printed at 31 versus an expected reading of 34. Also, BOE Governor Mark Carney warned insurance companies on risk saying, “In the UK, the biggest risks are associated with the housing market, which is why last spring the Bank took graduated and proportionate actions. We are also alert to the possibility that financial markets may be mispricing risk. As the FSB concluded last week, there are increased signs of complacency in financial markets, in part reflecting search for yield amidst exceptionally accommodative monetary policies.” Cable then made its weekly low of 1.6237 on Friday after U.S. Final GDP met expectations. GBP/USD went on to close the week at 1.6245, with an overall decline of -0.2%.

AUD/USD Declined sharply last week, trading down to a level not seen since February. The decline in the rate was in large part due to expectations of higher U.S. interest Rates, risk assets favouring the Greenback and comments from the RBA’s Glenn Stevens. The week began with the pair making its weekly high of 0.8948 on Monday after a lower than expected U.S. Existing Home Sales number. The rate continued lower on Tuesday after China’s PBOC cut interest rates on 14 day repos by 20 bps after reducing the rate by 10 bps in July, showing an easing bias for the PBOC as the Chinese economy begins to show weakness. China is Australia’s biggest trading partner. On Wednesday, the pair gained ground after the RBA’s Financial Stability Review expressed concern over housing loans stating, “Recent housing price growth seems to have encouraged further investor activity. As a result, the composition of housing and mortgage markets is becoming unbalanced, with new lending to investors being out of proportion to rental housing’s share of the housing stock.” The rate extended its losses on Thursday after comments from RBA Governor Stevens, saying that, “I'm not naive enough to believe that these kinds of tools are, you know, any kind of panacea or a permanent solution. I'm old enough to remember the lessons of regulation in the past. That doesn't mean you shouldn't use them for a period if, at the margin, they might be helpful and that's the kind of thing that's in my mind, nothing more.” The pair then made its weekly low of 0.8747 after U.S. Final GDP came out as expected. AUD/USD went on to close at 0.8762, showing a decline of -1.8% from its previous weekly close.

USD/CAD Made a seven month high last week as Canada reported lower than expected Retail Sales data and with mixed economic numbers out of the United States. The week began with the rate making its weekly low of 1.0809 after BOC Governing Council Member Wilkins said that “The bottom line is that potential output growth in Canada and other industrialized economies will be lower than it was in the years leading up to the crisis, we also think that the neutral rate of interest is lower”. The pair gained fractionally on Tuesday after Canadian Retail Sales declined -0.1% m/m versus an expected increase of +0.4%, while Core Retail Sales declined -0.6% compared to an expected decline of -0.1%. On Wednesday, the pair rose sharply after better than expected U.S. New Home Sales.  Thursday saw the pair decline after mixed U.S. Durable Goods Orders data. The pair then made its weekly high of 1.1168 on Friday after positive U.S. Final GDP data. USD/CAD went on to close at 1.1154, with an overall gain of +1.7% on the week.

NZD/USD Dropped sharply last week after unscheduled comments from the RBNZ’s Graeme Wheeler and despite a better than expected New Zealand Trade Balance. The week began with the pair declining after making its weekly high of 0.8168 as New Zealand Westpac Consumer Sentiment printed at 116.7 versus a previous reading of 121.2. The pair continued heading south on Tuesday after comments from the FOMC’s Powell and Kocherlakota. On Wednesday, the pair consolidated at a slightly higher level after the New Zealand Trade Balance came out showing a narrowing deficit of -472M versus an expected deficit of 1.12B. The rate then declined sharply on Thursday in the wake of comments by RBNZ Governor Graeme Wheeler, saying that, “The bank would welcome a move towards a more sustainable exchange-rate level”. He continued, “Unjustified and unsustainable are important considerations in assessing whether exchange-rate intervention is feasible.” The pair then made its weekly low of 0.7858 as U.S. Final GDP came out meeting expectations. NZD/USD went on to close at 0.7862, with an overall loss of -3.2% for the week.


The Week Ahead

USD: The upcoming U.S. economic calendar is reasonably busy this week, featuring key jobs data on Wednesday and Friday. Monday starts the week’s highlights off with Core PCE Price Index (0.0%), Personal Spending (0.5%), Pending Home Sales (-0.4%), and Tuesday’s key events include Chicago PMI (61.6) and CB Consumer Confidence (92.2). Wednesday then features ADP Non-Farm Employment Change (206K), ISM Manufacturing PMI (58.6), and Crude Oil Inventories (last -4.3M), while Thursday offers Weekly Initial Jobless Claims (299K) and Factory Orders (-9.2%). Friday’s important data then concludes the week with Non-Farm Payrolls (216K), the Trade Balance (-41.0B), the Unemployment Rate (6.1%), Average Hourly Earnings (0.2%) and ISM Non-Manufacturing PMI (58.5).

AUD: The upcoming Australian economic calendar is rather quiet this week, only featuring Retail Sales (0.4%) on Wednesday, Building Approvals (1.1%) and the Trade Balance (-0.78B) on Thursday. The Australian Daylight Saving Time Shift is on Saturday. Resistance for AUD/USD is seen at 0.8830/47, 0.8889 and 0.8920, with support noted at 0.8729/47, 0.8693 and 0.8659.

NZD: The upcoming New Zealand economic calendar is fairly quiet this week, only Building Consents (last 0.1%) on Monday, ANZ Business Confidence (last 24.4) on Tuesday and the tentatively scheduled GDT Price Index (last 0.0%) on Wednesday. The chart for NZD/USD shows resistance at 0.7872/88, 0.7903/06 and 0.7932. On the downside, technical support is expected at 0.7856/57, 0.7838/46 and 0.7804/29.

GBP: The upcoming UK economic calendar is quite busy this week, featuring Current Account data on Tuesday. Monday starts the week’s highlights off with Net Lending to Individuals (3.1B), and Tuesday’s key events include Nationwide HPI (0.6%), the Current Account (-16.9B), Final GDP (0.8%), Preliminary Business Investment (2.1%), and a speech by MPC Member Miles. Wednesday then features Manufacturing PMI (52.6) and a speech by MPC Member Forbes, while Thursday offers Construction PMI (63.7). Friday’s important data then concludes the week with Services PMI (59.1). Resistance to the topside for GBP/USD shows at 1.6251/62, 1.6280/1.6309, 1.6336/57, while support for the pair is expected at 1.6245/51, 1.6204/15 and 1.6161.

EUR: The upcoming Eurozone economic calendar is very busy this week, featuring the ECB’s Minimum Bid Rate Decision on Thursday. Monday starts the week’s highlights off with German Preliminary CPI (-0.1%), Spanish Flash CPI (-0.3%), and the tentatively scheduled Italian 10-year Bond Auction (last average yield 2.39 percent, with a 1.3 bid to cover ratio). Tuesday’s key events include German Retail Sales (0.6%), French Consumer Spending (-0.2%), the German Unemployment Change (-2K), the EZ CPI Flash Estimate (0.3%), the EZ Core CPI Flash Estimate (0.9%) and the EZ Unemployment Rate (11.5%). Wednesday then features Spanish Manufacturing PMI (52.3), Italian Manufacturing PMI (49.4), the tentatively scheduled German 10-year Bond Auction (last average yield 1.05 percent, with a 1.4 bid to cover ratio). Thursday offers the Spanish Unemployment Change (31.3K), the ECB’s Minimum Bid Rate Decision (unchanged at 0.05%) and the ECB Press Conference. Friday is a German Bank Holiday, and its important data concludes the week with Spanish Services PMI (56.9), Italian Services PMI (49.6) and Retail Sales (0.1%). Resistance for EUR/USD is seen at 1.2692/96, 1.2744/54 and 1.2795/1.2805, with support showing at 1.2623/76, 1.2588/89 and 1.2501/19.

JPY: The upcoming Japanese economic calendar is moderately active this week, featuring Retail Sales data on Tuesday. Monday is quiet, so Tuesday starts the week’s highlights off with Household Spending (-3.5%), Preliminary Industrial Production (0.2%), Retail Sales (0.4%), Average Cash Earnings (1.1%). Wednesday’s key events then include the Tankan Manufacturing Index (11) and the Tankan Non-Manufacturing Index (17), which concludes the week’s highlights. Resistance for USD/JPY currently shows up at 111.78, 110.39 and 109.45/53, with support indicated at 108.53/98, 107.39 and 105.70.

CAD: The upcoming Canadian economic calendar is quiet this week, only featuring GDP (0.2%) and RMPI (-1.7%) on Tuesday, and the Trade Balance (1.5B) on Friday. Resistance for USD/CAD is seen at 1.1158, 1.1172/94, and 1.1223/29, while support shows at 1.1097/98, 1.1030/52 and 1.0903/41.

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