AUD Weekly Market Watch 21/04/2014

Last week recap

EUR/USD Lost ground last week, as the Greenback recovered from its previous week’s losses with Europe reported weaker economic numbers and mostly positive data out of the United States. The week began on a soft note, with the rate declining on Monday after Eurozone Industrial Production increased +0.2% m/m, versus +0.3% expected, while U.S. Retail Sales increased +1.1% m/m, versus +0.8% expected. Core Retail Sales also showed improvement, increasing +0.7%, versus +0.5% expected. Monday also had comments from the ECB’s Draghi, who stated, “A strengthening of the exchange rate requires further monetary stimulus. That is an important dimension for our price stability”. The pair then made its weekly low of 1.3789 on Tuesday after German ZEW Economic Sentiment printed at 43.2, versus an expected reading of 46.3, nevertheless, EZ ZEW Economic Sentiment came out at 61.2, versus 60.7 expected, while the EZ Trade Balance showed an expanding surplus of+15.0B. U.S. numbers on Tuesday had both Core CPI and CPI increase +0.2% m/m, versus +0.1% expected, while the Empire State Manufacturing Index printed at 1.3, significantly lower than the reading of 8.2 that was expected. On Wednesday, the rate gained marginally after U.S. Building Permits came out at +0.99M, versus +1.0M expected, and Fed Chair Janet Yellen stated that, “While monetary policy discussions naturally begin with a baseline outlook, the path of the economy is uncertain, and effective policy must respond to significant unexpected twists and turns the economy may take. My primary focus today will be on how the FOMC's monetary policy framework has evolved to best support the recovery through those twists and turns, and what this framework is likely to imply as the recovery progresses.” The rate then resumed its decline on Thursday after making its weekly high of 1.3864 as German PPI declined -0.3% m/m, versus an expected increase of +0.1% and the U.S. Philly Fed Manufacturing Index printing at 16.6, significantly higher than the expected reading of 9.6. The rate then consolidated at a slightly higher level on Friday as many countries observed the Good Friday bank holiday. EUR/USD went on to close the week at 1.3811, showing an overall decline of -0.5%. 

USD/JPY Recovered some of its previous week’s losses last week, as the United States reported better than expected economic data and with very little in the way of economic numbers out of Japan. The week began on a positive note, with the rate gaining after making its weekly low of 101.41 on Monday as the United States reported better than expected Retail Sales data. The pair then consolidated at a slightly lower level on Tuesday despite better than expected U.S. CPI numbers. The rate resumed rallying on Wednesday after BOJ Governor Kuroda stated, “We will adjust policy when needed while scrutinizing both upside and downside risks to the economy and prices,” he continued, “our view is that exports will eventually pick up in line with improvements in the economy. But for now, we haven't seen enough data telling us when and by how much exports will rise”. The pair extended its gains on Thursday after a positive U.S. Initial Jobless Claims and Philly Fed Manufacturing Index releases. The rate then consolidated at a slightly lower level on Friday despite Japanese Tertiary Industry Activity declined -1.0% m/m, versus an expected increase of +0.2%. USD/JPY went on to close at 102.41, showing an overall gain of +0.8% from its previous weekly close. 

GBP/USD Extended its previous week’s gains last week as the UK reported a drop in the Unemployment Rate and despite the release of mostly positive U.S. economic data. The week began on a quiet note, with Cable consolidating at a slightly lower level on Monday as the United States reported better than expected Retail Sales numbers. The pair then consolidated again on Tuesday after making its weekly low of 1.6656 after UK CPI came out at 1.6% as widely anticipated, while the UK BRC Retail Sales Monitor showed a decline of -1.7% y/y, versus a previous reading of -1.0%. Also out were UK PPI Input, which declined -0.6%, versus -0.1% expected, and UK RPI, which came out at 2.5% as widely expected. On Wednesday, Cable rose sharply after UK Claimant Count Change showed a decline of -30.4K, in line with expectations, while the UK Unemployment Rate declined to 6.9% from 7.2%. The pair then made its weekly high of 1.6841 on Thursday before selling off after positive U.S. employment and manufacturing data. The pair then gained marginally on Friday in the absence of any significant data out of either country. GBP/USD went on to close at 1.6798, showing an overall gain of +0.5% for the week. 

AUD/USD Reversed direction, trading lower last week as the RBA Meeting Minutes for April warned that recent strength in the exchange rate had slowed the positive effects on the economy that the previous decline had made. The week began with the pair making its weekly high of 0.9426 on Monday despite positive U.S. Retail Sales data. The rate then fell sharply on Tuesday after the RBA reiterated their neutral stance in their April Meeting Minutes stating that, “The Australian dollar had appreciated, partly in response to domestic economic data, and it was now close to the level in November 2013, although on a trade-weighted basis the exchange rate was still about 12 per cent below its peak a year earlier. Members noted that the New Zealand dollar was currently at levels equivalent to historical peaks against the Australian dollar, following the tightening of monetary policy by the Reserve Bank of New Zealand.” On Wednesday, the pair rose marginally despite positive U.S. data. The rate then resumed its decline on Thursday, making its weekly low of 0.9320 after Australian NAB Quarterly Business Confidence came out with a reading of 6, versus a previous 8 print, and Australian New Motor Vehicle Sales, which declined -0.3% m/m, versus a previous decline of -0.1%. The pair then consolidated at a slightly lower level on Friday, bringing AUD/USD to close at 0.9325, showing an overall decline of -0.7% from its previous weekly close. 

USD/CAD Gained ground last week as the BOC left rates unchanged and the United States reported positive economic data. The week began with the rate making its weekly low of 1.0941 on Monday despite better than expected U.S. Retail Sales data. The pair then began climbing on Tuesday despite Canadian Manufacturing Sales increasing +1.4% m/m, versus +1.1% expected. The rate continued higher on Wednesday after the BOC left its benchmark Overnight Rate unchanged at 1.0%. The BOC Rate Statement noted that, “I n sum, the Bank continues to see a gradual strengthening in the fundamental drivers of growth and inflation in Canada. This view hinges critically on the projected upturn in exports and investment. With underlying inflation expected to remain below target for some time, the downside risks to inflation remain important. At the same time, the risks associated with household imbalances remain elevated. The Bank judges that the balance of these risks remains within the zone for which the current stance of monetary policy is appropriate and therefore has decided to maintain the target for the overnight rate at 1 per cent.” The rate then consolidated at a slightly lower level on Thursday after Canadian Core CPI increased +0.3% m/m, as widely anticipated, and CPI, which increased +0.6% m/m, versus +0.4% expected. The rate then gained fractionally on Friday, bringing USD/CAD to close at 1.1020, showing an overall gain of +0.4% for the week. 

NZD/USD Lost ground last week as the United States reported better than expected economic numbers and New Zealand reported a lower than expected CPI number. The week began with the rate consolidating at a slightly lower level after making its weekly high of 0.8694 on Monday after better than expected U.S. Retail Sales data. The rate then dropped sharply on Tuesday after New Zealand CPI increased +0.3% q/q, versus +0.5% expected. The pair then rallied on Wednesday despite better numbers out of the United States, and possibly in expectation of a rate rise by the RBNZ next week. The rate reversed on Thursday, trading lower as U.S. numbers continued showing improvement in employment and manufacturing. On Friday, the pair made its weekly low of 0.8564 in the absence of any significant data out of either country, which brought NZD/USD to close at 0.8568, with an overall loss of  -1.4% for the week. 

The Week Ahead

USD: The upcoming U.S. economic calendar is quieter than last week, featuring Weekly Initial Jobless Claims data on Thursday.  Monday is quiet, so starts the week’s highlights off with Existing Home Sales (4.57M), and Tuesday’s key events include Flash Manufacturing PMI (56.2), New Home Sales (455K), Crude Oil Inventories (last 10.0M).  Wednesday then offers little of note, while Thursday features Core Durable Goods Orders (0.6%), Durable Goods Orders (2.1%) and Weekly Initial Jobless Claims (309K). Friday’s important data then concludes the week with the Revised University of Michigan Consumer Sentiment survey (83.2).

AUD: The upcoming Australian economic calendar is less active than last week, only featuring the Leading Index (last 0.2%) on Tuesday, and the CPI (0.8%) and Trimmed Mean CPI (0.7%) on Wednesday.  Monday and Friday are also Australian Bank Holidays. Resistance for AUD/USD is seen at 0.9422/60, 0.9527 and 0.9757, with support noted at 0.9253/0.9317, 0.9204 and 0.9112/37.

NZD: The upcoming New Zealand economic calendar is a bit quieter than last week, only featuring the RBNZ Official Cash Rate Decision (25bp rise to 3.00% expected) and the associated Rate Statement on Thursday. In addition, Monday and Friday are Bank Holidays in New Zealand. The chart for NZD/USD shows resistance at 0.8622/41, 0.8671/0.8700 and 0.8744/64.  On the downside, technical support is expected at 0.8499/0.8584, 0.8423/32 and 0.8390.

GBP: The upcoming UK economic calendar is about as active as last week, featuring the BOE Official Bank Rate Decision on Wednesday.  Monday is a UK Bank Holiday, and Tuesday is quiet, so Wednesday starts the week’s highlights off with the MPC Asset Purchase Facility (unchanged at 375B, Votes 0-0-9), the MPC Official Bank Rate Decision (unchanged at 0.50%, Votes 0-0-9), Public Sector Net Borrowing (8.7B), and CBI Industrial Order Expectations (7).  Thursday’s key events then include CBI Realized Sales (18), while Friday’s important data then concludes the week with Retail Sales (-0.4%) and BBA Mortgage Approvals (48.9K). Resistance to the topside for GBP/USD shows at 1.6802/22, 1.6841 and 1.7047, while support for the pair is expected at 1.6750/85, 1.6548/1.6683 and 1.6441/65.

EUR: The upcoming Eurozone economic calendar is about as quiet as last week, featuring the German Ifo Business Climate survey on Thursday.  Monday is a German, French and Italian Bank Holiday, and Tuesday is quiet, so Wednesday starts the week’s highlights off with French Flash Manufacturing PMI (51.9), French Flash Services PMI (51.5), German Flash Manufacturing PMI (53.9), German Flash Services PMI (53.5), EZ Flash Manufacturing PMI (53.0) and EZ Flash Services PMI (52.7).  Thursday’s key events then include the German Ifo Business Climate survey (110.5) and a speech by ECB President Draghi.  In addition, Friday is a Bank Holiday in Italy. Resistance for EUR/USD is seen at 1.3820/43, 1.3878/1.3970 and 1.4000, with support showing at 1.3748/1.3807, 1.3642/98 and 1.3561.

JPY: The upcoming Japanese economic calendar is even quieter than last week, only featuring Trade Balance data (-1.27T) on Monday and Tokyo Core CPI (2.8%) on Friday.  Resistance for USD/JPY currently shows up at 102.64/102.97 and 103.75/104.12, with support indicated at 101.70/102.14, 100.00/101.43 and 96.56.

CAD: The upcoming Canadian economic calendar is considerably less active than last week, only featuring Wholesale Sales (0.7%) on Tuesday and Core Retail Sales (0.6%) and Retail Sales (0.5%) data on Wednesday.  Resistance for USD/CAD is seen at 1.1024/1.1053, 1.1099/94 and 1.1229, while support shows at 1.0909/56, 1.0857 and 1.0736.