AUD Weekly Market Watch 26/1/2015

Last Week recap

EUR/USD Fell sharply last week, making a new 12-year low after the ECB unveiled their quantitative easing program, which exceeded expectations and uncertainty ahead of Greek elections. The week began on a quiet note, with the pair rising fractionally as the United States observed a bank holiday. The rate then declined on Tuesday despite German ZEW Economic Sentiment printing at 48.4 compared to an expected reading of 40.1, also out was the EZ ZEW Economic Sentiment, which showed a reading of 45.2, significantly higher than the expected print of 37.6. On Wednesday, the pair made its weekly high of 1.1679 after U.S. Building Permits showed an increase of +1.03M versus +1.06M expected, while Housing Starts increased by +1.09M compared to +1.04M anticipated. The pair then dropped sharply on Thursday after the ECB left its benchmark Minimum Bid Rate unchanged at 0.05%, nevertheless, the central bank unveiled its €60B QE program, exceeding market expectations of €50B. ECB President Mario Draghi stated that the ECB would “launch an expanded asset purchase programme, encompassing the existing purchase programmes for asset-backed securities and covered bonds. Under this expanded programme, the combined monthly purchases of public and private sector securities will amount to €60 billion. They are intended to be carried out until end-September 2016 and will in any case be conducted until we see a sustained adjustment in the path of inflation which is consistent with our aim of achieving inflation rates below, but close to, 2% over the medium term. In March 2015 the Eurosystem will start to purchase euro-denominated investment-grade securities issued by euro area governments and agencies and European institutions in the secondary market.” The rate then made its weekly and a 12-year low of 1.1113 on Friday after German Flash Manufacturing PMI printed at 51.0 versus 51.8 expected, while French Flash Services PMI showed a reading of 49.5 versus 48.1 expected. U.S. numbers had Flash Manufacturing PMI print at 53.7 compared to an expected reading of 54.1 and U.S. Existing Home Sales, which increased +5.04M versus 5.08M expected. EUR/USD went on to close at 1.1204, showing an overall decline of -3.2% from its previous weekly close. As of this writing, the anti-austerity Syriza party’s projected share of Greek parliamentary seats has increased to 149, just one seat short of a majority after 62% of the results were tallied.

USD/JPY Saw little change last week as the BOJ left monetary policy unchanged but lowered its outlook on inflation and increased its forecast for growth. The week began on a positive note, with the pair gaining after making its weekly low of 116.92 on Monday in the absence of any significant data out of either country. The pair then made its weekly high of 118.86 on Tuesday after the IMF lowered its growth forecast for Japan from +0.8% to +0.6% for 2015. On Wednesday, the rate declined after the BOJ’s Monetary Policy Statement left stimulus measures unchanged and lowered its CPI forecast for next year from +2.1% to +1.7%, but increased its outlook on GDP from +1.5% to +2.1%. The statement noted that, “Japan's economy has continued to recover moderately as a trend, and effects such as those of the decline in demand following the front-loaded increase prior to the consumption tax hike have been waning on the whole. Overseas economies --mainly advanced economies-- have been recovering, albeit with a lacklustre performance still seen in part. In this situation, exports have shown signs of picking up.” The pair then gained on Thursday despite a lower than expected U.S. Initial Jobless Claims number. Friday saw the rate lose ground as the United States reported lower than expected Existing Home Sales and Flash Manufacturing PMI data. USD/JPY went on to close at 117.73, off -16 pips and virtually unchanged on the week.

GBP/USD Extended its previous week’s losses last week as the MPC Monetary Policy Meeting Minutes showed unanimous decisions on both interest rates and asset purchases at their January 8th rate decision. The week began on a soft note, with Cable declining on Monday in the absence of any significant data out of either country. The pair then gained ground on Tuesday after the U.S. NAHB Housing Index declined to 57 from 58. On Wednesday, Cable consolidated at a slightly lower level after the MPC Meeting Minutes showed unanimous decisions on both the Official Bank Rate — which was expected to show two dissenting votes — and the Asset Purchase Facility at 375B, and despite UK Claimant Count Change showing a decline of -29.7K versus -24.2K expected with the previous number upwardly revised from -26.9K to -29.6K. Also, the UK Unemployment Rate dropped to 5.8% from 6.0%. Cable then fell sharply on Thursday after making its weekly high of 1.5211 as UK Public Sector Net Borrowing increased to 12.5B versus 9.2B expected, with the previous number downwardly revised from 13.4B to 11.7B, while UK CBI Industrial Order Expectations printed at 4 compared to an expected reading of 6. The rate continued declining on Friday, making its weekly low of 1.4950 despite UK Retail Sales, which increased +0.4% m/m, notably higher than the expected decline of -0.6% that was expected. GBP/USD went on to close at 1.4983, with an overall loss of -1.0% for the week.  

AUD/USD Reversed direction, trading sharply lower last week as asset flows favoured the Greenback over the Aussie and with very little economic data out of Australia. The week began with the rate declining on Monday despite Australian New Motor Vehicle Sales increasing +3.0% m/m compared to a previous reading of -0.5%. The pair continued lower on Tuesday after making its weekly high of 0.8233 despite Westpac Consumer Sentiment showing an increase of +2.4%, notably higher than the previous print of -5.7%. The pair extended its losses on Wednesday as the United States reported mixed housing data. On Thursday, the rate continued its slide as Australian MI Inflation Expectations printed at +3.2% compared to a previous reading of +3.4%. The pair then made its weekly low of 0.7880 on Friday despite lower than expected U.S. Existing Home Sales and Manufacturing PMI data. AUD/USD went on to close at 0.7907, with an overall loss of -4.0% from its previous weekly close.

USD/CAD Extended its previous week’s gains last week as the BOC surprised the market lowering the benchmark Overnight Rate to 0.75% from 1.0%. The week began with the pair declining on Monday, making its weekly low of 1.1933 despite Canadian Foreign Securities Purchases declining to 4.29B compared to an expected 7.23B. The rate then rallied on Tuesday after Canadian Manufacturing Sales declined -1.4% m/m versus -0.5% expected. The pair continued gaining on Wednesday after Canadian Wholesale Sales dropped -0.3% m/m compared to an expected increase of +0.2%. On Wednesday, the pair gained sharply after the BOC lowered its Overnight Rate by 25 bps to 0.75%. The central bank’s rate statement noted that, “Weaker oil prices will pull down the inflation profile. Total CPI inflation is projected to be temporarily below the inflation-control range during 2015, moving back up to target the following year. Underlying inflation will ease in the near term but then return gradually to 2 per cent over the projection horizon. The oil price shock increases both downside risks to the inflation profile and financial stability risks. The Bank’s policy action is intended to provide insurance against these risks, support the sectoral adjustment needed to strengthen investment and growth, and bring the Canadian economy back to full capacity and inflation to target within the projection horizon.” The pair continued higher on Thursday despite a lower U.S. employment number. The rate then made its weekly and a five and a half year high of 1.2456 on Friday after Canadian CPI declined -0.07% m/m versus -0.5% expected, while Core CPI declined -0.3% m/m as widely expected, nevertheless, Canadian Retail Sales increased +0.4% m/m versus +0.1% expected, while the Core number increased +0.7% m/m compared to +0.5% expected. USD/CAD went on to close at 1.2421, with an overall gain of +3.5% for the week.

NZD/USD Declined sharply last week as New Zealand reported mostly mixed economic numbers and asset flows favoured the Greenback over the Kiwi. The week began with the pair declining after making its weekly high of 0.7806 on Monday as the New Zealand NZIER Business Confidence index printed at 23 versus a previous reading of 19. The pair continued its slide on Tuesday after New Zealand CPI declined -0.2% q/q compared to an expected flat reading. On Wednesday, the rate extended its losses despite the NZ Business NZ Manufacturing Index printed 57.7 compared to a previous reading of 55.6 upwardly revised from 55.2. The pair continued lower on Thursday despite a lower than expected U.S. Initial Jobless Claims number. Friday saw the rate make its weekly low of 0.7430 despite lower than expected U.S. economic data. NZD/USD went on to close at 0.7452, off -4.4% from its previous weekly close.

The Week Ahead

USD: The U.S. economic calendar is rather active this coming week, featuring the FOMC Statement on Wednesday.  Monday is quiet, so Tuesday starts the week’s highlights off with Core Durable Goods Orders 0.6%) (-0.7%) USD Durable Goods Orders 0.6%) (-0.9%), CB Consumer Confidence (95.7), and New Home Sales (452K). Wednesday’s key events then include Crude Oil Inventories (10.1M), the FOMC Statement, and the Federal Funds Rate Decision (unchanged at <0.25%), while Thursday offers Weekly Initial Jobless Claims (301K), and Pending Home Sales 0.6%). Friday’s important data then concludes the week with Advance GDP (3.1%), the Advance GDP Price Index (0.9%), the Employment Cost Index (0.6%), the Chicago PMI (58.1), and the Revised University of Michigan Consumer Sentiment survey (98.5).

AUD: The Australian economic calendar is somewhat busy this coming week, featuring CPI data on Wednesday.  Sunday is a Bank Holiday, and Monday is quiet, so Tuesday starts the week’s highlights off with the NAB Business Confidence survey (last 1). Wednesday’s key events then include CPI (0.3%) and Trimmed Mean CPI (0.5%), while Thursday offers Import Prices (1.5%) and Friday’s important data then concludes the week with PPI (0.3%). Resistance for AUD/USD is seen at 0.8067, 0.8105 and 0.8172, with support noted at 0.7880 and 0.7684/0.7700.

NZD: The New Zealand economic calendar is characteristically quiet this coming week, only featuring the RBNZ’s Official Cash Rate Decision (unchanged at 3.5%)), the RBNZ Rate Statement, and the Trade Balance ((-70M) data on Wednesday and Building Consents (last 10%)) on Thursday. The chart for NZD/USD shows resistance at 0.7605/97, 0.7500/85 and 0.7455/58. On the downside, technical support is expected at 0.7430, 0.7368/94 and 0.7323/25.

GBP: The UK economic calendar is rather quiet this coming week, featuring Preliminary GDP data on Tuesday.  Monday starts the week’s highlights off with Mortgage Approvals (36.6K), and Tuesday’s key events include Preliminary GDP (0.6%). Wednesday then offers nothing notable, while Thursday features Nationwide HPI (0.4%) and CBI Realized Sales (61). Friday’s important data then concludes the week with Net Lending to Individuals (3.2B). Resistance to the topside for GBP/USD shows at 1.5101, 1.5074/77 and 1.5033, while support for the pair is expected at 1.4950 and 1.4812.

EUR: The Eurozone economic calendar is quite busy this coming week, featuring CPI data on Thursday and Friday.  Sunday starts the week’s highlights off with the Greek Parliamentary Elections, while Monday offers the German Ifo Business Climate survey (106.7) and the Eurogroup Meetings, and Tuesday features the ECOFIN Meetings. Wednesday’s key events then include the GfK German Consumer Climate survey (9.2), and Thursday features German Preliminary CPI (-0.8%), the German Unemployment Change (-9K), the EZ M3 Money Supply (3.6%), EZ Private Loans (-0.5%), the tentatively scheduled Italian 10-year Bond Auction (last average yield 1.89 percent with a 1.3 bid-to-cover ratio). Friday’s important data then concludes the week with German Retail Sales (0.4%), French Consumer Spending (0.4%), Spanish Flash CPI (-1.5%), Spanish Flash GDP (0.5%), EZ CPI Flash Estimate (-0.5%), Core CPI Flash Estimate (0.6%), and the Unemployment Rate (11.5%). Resistance for EUR/USD is seen at 1.1459, 1.1375 and 1.0917, with support showing at 1.1114 and 1.0762/86.

JPY: The Japanese economic calendar is moderately active this coming week, featuring Retail Sales data on Wednesday.  Sunday starts the week’s highlights off with the BOJ’s Monetary Policy Meeting Minutes and the Trade Balance (-0.74T), and Monday and Tuesday are quiet. Wednesday’s key events then include Retail Sales (1.1%), while Thursday features Household Spending (-2.3%), Tokyo Core CPI (2.2%), and Preliminary Industrial Production (1.3%). That concludes the week’s important data since Friday offers nothing notable. Resistance for USD/JPY currently shows up at 117.94/118.04, 118.57/97 and 119.62, with support indicated at 117.17/43, 115.86/89 and 115.56.

CAD: The Canadian economic calendar is very quiet this coming week, only featuring GDP data ((-0.1%)) on Friday. Resistance for USD/CAD is seen at 1.2456, 1.2680 and 1.2735, while support shows at 1.2045, 1.1976 and 1.1841/86.