AUD Weekly Market Watch 22/12/2014


Last Week recap

EUR/USD Declined last week as the FOMC Statement indicated the Fed would hold off on hiking interest rates and with both economies reporting mixed economic data. The week began on a soft note, with the rate declining on Monday after the U.S. Capacity Utilization Rate increased to 80.1% from an upwardly revised 79.3% with expectations of 79.4%. Also, U.S. Industrial Production increased to +1.3% m/m compared to an expected +0.8%. The pair then made its weekly high of 1.2569 on Tuesday after mixed European PMI data: French Flash Manufacturing PMI printed at 47.9 versus 48.7 expected; French Flash Services PMI came out at 49.8 compared to 48.7 expected; German Flash Services PMI printed at 51.4 compared to 52.6 expected, while German Flash Manufacturing PMI showed a reading of 51.2 versus 50.4 expected. Also out was German ZEW Economic Sentiment, which printed at 34.9, significantly higher than the 19.8 reading that was expected. Tuesday’s U.S. data had Building Permits and Housing starts come out at 1.04M and 1.03M respectively and in line with expectations. The rate then declined sharply on Wednesday after the FOMC Statement reiterated that, “The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.” The Fed changed the term “considerable time” for “with patience for normalization” in its statement. Also out on Wednesday was U.S. CPI, which declined -0.3% m/m, while the Core number came out at +0.1% m/m as widely anticipated. Eurozone Final CPI came in at +0.3% y/y, in line with expectations. The pair extended its losses on Thursday after the Swiss National Bank lowered interest rates into negative territory, also, German Ifo Business Climate showed a reading of 105.5, as widely expected. Thursday’s U.S. data had weekly Initial Jobless Claims drop to 289K, while the Philly Fed Manufacturing Index printed at 24.5 compared to an expected reading of 26.3. The rate then made its weekly low of 1.2219 on Friday as GfK German Consumer Climate printed at 9.0, in line with expectations. EUR/USD went on to close at 1.2226, showing an overall decline of -1.9% for the week.

USD/JPY Recovered some of its previous week’s losses last week as the BOJ maintained stimulus measures as widely anticipated and with mixed U.S. economic releases. The week began with the rate declining on Monday after PM Abe’s party coalition won a majority in the Japanese Parliament Lower House elections over the weekend. Also out Monday, the Japanese Tankan Manufacturing Index printed at 12 compared to an expected reading of 13, while the Tankan Non-Manufacturing Index increased to 16 versus 13 expected. The pair continued lower on Tuesday, making its weekly low of 115.56 after the Japanese Trade Balance showed a contracting deficit of -0.93T versus -0.99T expected. On Wednesday, the rate reversed direction, trading sharply higher after the FOMC indicated it would leave rates at historical lows with “patience for its normalization”, in addition to mixed U.S. CPI data.  The pair consolidated at a slightly higher level on Thursday after mixed employment and manufacturing data. Friday saw the pair make its weekly high of 119.61 after the BOJ’s Monetary Policy Statement showed an 8 to 1 vote on the monetary base expansion, leaving it at an annual 80T with an interest rate near zero. Takahide Kiuchi was the only dissenting vote, once more calling for a reduction to 60-70T. USD/JPY went on to close the week at 119.50, showing an overall gain of +0.6% from its previous weekly close.

GBP/USD Declined last week as the BOE Monetary Policy Meeting Minutes showed two dissenting votes on interest rates and a unanimous vote on the size of the Asset Purchase Facility. The week began with Cable losing ground on Monday in the wake of better than expected U.S. Industrial data and despite UK CBI Industrial Order Expectations printing at 5 versus an expected reading of 3. The rate then made its weekly high of 1.5784 on Tuesday after the results of UK major banks stress tests, the Financial Policy Committee stated that, “the FPC judged that the resilience of the system had improved significantly since the capital shortfall exercise in 2013. Moreover, the stress-test results and banks’ capital plans, taken together, indicated that the banking system would have the capacity to maintain its core functions in a stress scenario.” Also out was UK CPI, which increased an annualized +1.0% compared to an expected increase of +1.2% m/m, while PPI Input declined -1.0% m/m, in line with expectations and RPI, which increased +2.0% y/y versus +2.2% expected. Cable then made its weekly low of 1.5540 on Wednesday after the BOE’s Monetary Policy Meeting Minutes showed members were concerned over the decline in oil prices in November and with the two dissenting votes on interest rates by members Weale and McCafferty and a unanimous vote on the size of stimulus. Also out were UK Claimant Count Change, which declined -26.9K versus -19.8K expected, and the UK Average Earnings Index, which increased +1.4% 3m/y versus +1.3% expected. Cable recovered some of its losses on Thursday after UK Retail Sales increased +1.6% m/m, significantly higher than the expected increase of +0.3%. The pair then resumed selling off on Friday despite UK Public Sector Net Borrowing, which showed +13.4B compared to an expected +14.8B and UK CBI Realized Sales, printing at 61 versus 30 expected. GBP/USD went on to close at 1.5621, off -0.5% for the week.

AUD/USD Continued its slide last week as the RBA’s Monetary Policy Meeting Minutes downplayed any change in the Cash Rate anytime soon, and with mixed economic data out of both countries. The week began with the pair declining on Monday after the Australian Treasury released the Mid-Year Economic and Fiscal Outlook. Australian Treasurer, Joe Hockey stated that, “new trade deals with Korea, Japan and China will deliver broader and deeper market access, particularly for Australian small businesses. We also expect housing construction to strengthen which will further boost economic activity. I say directly to the Australian people that whilst we have faced many challenges we have made a good start fixing the Budget.” The pair then consolidated at a slightly higher level on Tuesday after making its weekly high of 0.8273 after the RBA’s Monetary Policy Meeting Minutes showed little change on monetary policy, stating that, “Members agreed that further exchange rate depreciation was likely to be needed to achieve balanced growth in the economy. They noted that market expectations implied some chance of an easing of policy during 2015 and discussed the factors that might be producing such an expectation.” On Wednesday, the rate resumed its decline, making its weekly low of 0.8106 after the U.S. Fed released the FOMC Statement. The pair then recovered somewhat on Thursday as the U.S. released mixed economic data. The rate then declined on Friday in the absence of any significant data out of either country. AUD/USD went on to close at 0.8145, with an overall weekly decline of -1.2%.

USD/CAD Continued gaining last week as asset flows favoured the Greenback over the Loonie and with both countries reporting mixed economic data. The week began with the rate making both its weekly high of 1.1672 and its weekly low of 1.1547 on Monday after the release of mixed U.S. economic data. The pair then sold off on Tuesday after Canadian Foreign Securities Purchases increased to +9.53B compared to an expected +5.21B, while Canadian Manufacturing Sales declined -0.6% m/m versus -0.4% expected. The rate then rose on Wednesday after Canadian Wholesale Sales increased +0.1% m/m compared to an expected increase of +0.9%. Thursday saw the rate decline after mixed economic numbers out of the United States. The pair then gained fractionally on Friday after Canadian Core CPI declined by -0.2% m/m versus an expected increase of +0.1%, while CPI declined -0.4% compared to -0.2% expected, also, Canadian Retail Sales came out with a flat reading m/m versus an expected decline of -0.4%, while Core Retail Sales increased +0.2% as widely expected. USD/CAD closed at 1.1621, showing a decline of 0.5% for the week.

NZD/USD lost a fraction last week despite mostly better than expected economic data out of New Zealand and with mixed numbers out of the United States. The pair started the week on a soft note, declining in the wake of mixed U.S. economic data. The rate then made its weekly high of 0.7847 on Tuesday after the New Zealand Current Account showed a contracting deficit of -5.01B compared to an expected deficit of -5.32B, while the New Zealand GDT Price Index increased +2.4% versus a previous reading of -1.1%. On Wednesday, the pair declined sharply after the FOMC Statement and mixed economic numbers out of the United States, and despite New Zealand GDP increasing +1.0% q/q versus +0.7% expected. The rate then sold off on Friday after New Zealand ANZ Business Confidence printed at 30.4 compared to a previous reading of 31.5. NZD/USD went on to close the week at 0.7741, showing an overall weekly decline of -0.4%. 


The Week Ahead

USD: The U.S. economic calendar is quieter than usual this coming week, featuring Final GDP data on Tuesday.  Monday starts the week’s highlights off with Existing Home Sales (5.21M), and Tuesday’s key events include Core Durable Goods Orders (1.1%), Final GDP (4.3%), Durable Goods Orders (3.0%), Revised University of Michigan Consumer Sentiment survey (93.5), New Home Sales (461K), the Core PCE Price Index (0.1%), and Personal Spending (0.5%).  Wednesday then features Weekly Initial Jobless Claims (291K) and Crude Oil Inventories (last -0.8M). That concludes the week’s important data since Thursday is a Bank Holiday, and Friday offers nothing notable.

AUD: The Australian economic calendar is quiet this coming week, with Australian Bank Holidays on Wednesday and Thursday. Resistance for AUD/USD is seen at 0.8213/23, 0.8375 and 0.8479/84, with support noted at 0.8105 and 0.8066/81.

NZD: The New Zealand economic calendar is also quiet this coming week, only featuring Trade Balance data (-550M) on Monday.  Also, New Zealand has Bank Holidays on Wednesday and Thursday. The chart for NZD/USD shows resistance at 0.7791/0.7820, 0.7847/78 and 0.7925/94. On the downside, technical support is expected at 0.7605/97 and 0.7500/85.

GBP: The UK economic calendar is less active than usual this coming week, only featuring Current Account (-21.1B), BBA Mortgage Approvals (37.3K) and Final GDP (0.7%) on Tuesday. Also, Thursday and Friday are Bank Holidays in the UK. Resistance to the topside for GBP/USD shows at 1.5725/56, 1.5785 and 1.5825/1.5961, while support for the pair is expected at 1.5514/1.5613, 1.5458/99 and 1.5267.

EUR: The Eurozone economic calendar is very quiet this coming week, only featuring French Consumer Spending (0.2%) on Tuesday.  In addition, Wednesday is a German Bank Holiday; Thursday is a Bank Holiday in Germany, France and Italy; and Friday is a Bank Holiday in Germany and Italy. Resistance for EUR/USD is seen at 1.2241/70, 1.2357/98 and 1.2455/1.2500, with support showing at 1.2219 and 1.2133/62.

JPY: The Japanese economic calendar is rather active this coming week, featuring a speech by BOJ Governor Kuroda on Thursday.  Monday is quiet, and Tuesday is a Bank Holiday, so Wednesday starts the week’s highlights off with the BOJ’s Monetary Policy Meeting Minutes. Thursday’s key events then include a speech by BOJ Governor Kuroda, Household Spending (-3.5%), Tokyo Core CPI (2.3%), Preliminary Industrial Production (1.0%) and Retail Sales (1.2%).  Friday’s important data then concludes the week with Average Cash Earnings (0.5%). Resistance for USD/JPY currently shows up at 119.62, 121.38 and 121.84, with support indicated at 118.57/97, 117.85/94 and 117.23/43.

CAD: The Canadian economic calendar is very peaceful this coming week, only featuring GDP data (0.1%) on Tuesday.  Also, Thursday and Friday are Bank Holidays in Canada. Resistance for USD/CAD is seen at 1.1670/72 and 1.1723, while support shows at 1.1560/90, 1.1447/75 and 1.1368/1.1400.

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