AUD Weekly Market Watch 21/07/2014

Last week recap

EUR/USD Lost ground last week as the Greenback strengthened on geopolitical concerns over the situation in the Ukraine and with mostly weaker than expected numbers out of the Eurozone. The week began with the rate making its weekly high of 1.3620 on Monday, after a speech by ECB President Draghi, in which he said, “Upside and downside risks to the outlook for price developments are both seen as limited and broadly balanced over the medium term. We will monitor the possible repercussions of geopolitical risks and exchange rate developments closely in this context. The exchange rate is not a policy target for the ECB. Nevertheless, the exchange rate remains an important driver of future inflation in the euro area. Certainly, the appreciation that took place since mid-2012 had an impact on price stability. In the present context, an appreciated exchange rate is a risk to the sustainability of the recovery.” Also, EZ Industrial Production declined -1.1% m/m, versus an expected increase of +0.3%. The pair then began selling off on Tuesday after German ZEW Economic Sentiment printed at 27.1, versus 28.9 expected, while EZ ZEW Economic Sentiment came out with a reading of 48.1, significantly lower than the expected print of 62.3. U.S. data had Core Retail Sales increase +0.4% m/m, versus +0.5% expected, while Retail Sales increased only +0.2% m/m, versus +0.6% expected. On Wednesday, the rate extended its losses after testimony from Fed Chief Janet Yellen who told the Financial Services Committee that, “we have maintained the target range for the federal funds rate at 0 to 1/4 percent and have continued to rely on large-scale asset purchases and forward guidance about the future path of the federal funds rate to provide the appropriate level of support for the economy.” Economic data on Wednesday had U.S. PPI increase +0.4% m/m, versus +0.2% expected, while the headline number showed an increase of +0.2%, as was widely expected. The pair then consolidated at a slightly higher level on Thursday after EZ CPI increased +0.5% y/y, as widely expected, while Core CPI increased +0.8% y/y, both as widely anticipated. Thursday’s U.S. numbers had Building Permits show an annualized increase of +0.96M, versus +1.04M expected, and U.S. Housing Starts, increasing by +0.89M, versus +1.02M expected. In addition, the U.S. Philly Fed Manufacturing Index printed at 23.9, significantly higher than the expected reading of 15.6 that was expected. The rate then lost fractionally after making its weekly low of 1.3490 on Friday despite the U.S. Preliminary University of Michigan Consumer Sentiment survey showing a reading of 81.3, versus 83.5 expected. EUR/USD went on to close at 1.3522, showing an overall weekly decline of -0.6%.

USD/JPY Showed little change last week as the BOJ’s Monetary Policy Meeting Minutes and Monetary Policy statements indicated no change in the central bank’s monetary policy and with mixed economic data out of the United States. The week began on a positive note, as the Yen weakened in the absence of any significant data out of either country. On Tuesday, the pair continued higher after the BOJ’s Monetary Policy Statement, which noted that, “The weighted average of the overnight call rate has been below the 0.1 percent level, and interest rates on term instruments have declined somewhat. Compared with last month, stock prices have risen. Meanwhile, the value of the yen against the U.S. dollar and long-term interest rates has remained at more or less the same levels as last month.” After the statement release, BOJ Governor Haruhiko Kuroda said at a press conference that, "Inflation will not fall below one percent". The rate then consolidated at a slightly lower level on Wednesday after making its weekly high of 101.78 as the United States reported mixed economic numbers. The pair then dropped sharply on Thursday after weaker than expected U.S. Building Permits and Housing Starts data, nevertheless, the decline was mitigated by better than expected U.S. employment and manufacturing numbers. The rate then rallied on Friday after making its weekly low of 101.08 after the BOJ’s Monetary Policy Meeting Minutes for June 12th and 13th indicated the bank’s concern for geopolitical tension in the Ukraine and Iraq, but that the economic recovery continues on track. USD/JPY went on to close at 101.28, showing an overall gain of just 7 pips and virtually unchanged on the week. 

GBP/USD Lost fractionally last week, despite the UK reporting better than expected employment and CPI data and with mixed economic numbers out of the United States. The week began with the rate declining on Monday in the absence of any significant data out of either country. Cable then shot up on Tuesday, making its weekly high of 1.7190 after UK CPI increased to +1.9% y/y, versus +1.6% expected, also, UK RPI increased by +2.6% y/y, versus +2.5% expected, but PPI Input declined -0.8% m/m, versus an expected increase of +0.2% with the previous number significantly revised upward from -0.9% to +0.3%. The pair then consolidated at a slightly lower level on Wednesday after mixed U.S. economic data and despite the UK Claimant Count Change showing a decline of -36.3K, notably higher than the -27.1K decline that was expected, also, the UK Unemployment Rate declined to 6.5% from 6.6%. However, the UK Average Earnings Index showed an increase of only +0.3% 3m/y, versus +0.5% that was expected. Cable extended its losses on Thursday and Friday as the United States reported mixed economic data, which brought the pair to settle at 1.7084, showing an overall loss of a mere -0.1% from its previous weekly close. 

AUD/USD Was unchanged last week as both counties reported mixed economic numbers and as the RBA’s Monetary Policy Meeting Minutes indicated the central bank was concerned over the economic outlook and indicated uncertainty over the impact of the decline in mining investment and budget tightening. The week began on a positive note, with the pair gaining ground on Monday in the absence of any significant data out of either country. The rate then fell on Tuesday after the RBA’s Monetary Policy Meeting Minutes stated that, “Members noted that riskier asset markets, which had been the recipient of large capital inflows resulting from the accommodative monetary policy settings in the major economies, had been most affected by the shift in expectations about US monetary policy. Currencies and share markets of emerging market economies had fallen sharply, while sovereign bond yields in those countries had increased to their highest levels in around a year.” Also out on Tuesday were Australian New Motor Vehicle Sales, showing an increase of +1.7% m/m, versus a previous reading of +0.4%. The pair then made its weekly low of 0.9328 on Wednesday as the United States reported mixed economic data. The rate continued lower on Thursday after the Australian CB Leading Index increased +0.2% m/m, versus a previous reading of -0.2%, while Australian NAB Quarterly Business Confidence came out with a reading of 6, versus a previous print of 7, upwardly revised from 6. The pair then rallied sharply on Friday, making its weekly high of 0.9410 before settling at 0.9391, showing a weekly gain of 1 pip and virtually unchanged on the week. 

USD/CAD Extended its previous week’s gains last week as the BOC left rates unchanged and with both countries reporting mixed economic numbers. The week began with the pair declining on Monday in the absence of any significant data out of either country. The rate then gained ground on Tuesday after the United States reported mixed economic numbers. On Wednesday, the pair declined after making its weekly high of 1.0793 as the BOC left its benchmark Overnight Rate unchanged at 1.0%. The central bank reiterated in their rate release statement that, “Given the downgrade to the global outlook, economic activity in Canada is now projected to be a little weaker than previously forecast. However, the Bank still expects that the lower Canadian dollar and a projected strengthening in global demand will lead to a pickup in Canadian exports and business investment and, eventually, a more sustainable growth track. Meanwhile, household imbalances continue to evolve constructively and recent data are broadly consistent with a soft landing in Canada’s housing market. Real GDP growth is projected to average around 2 1/4 per cent during 2014–2016. Consequently, the economy is expected to reach full capacity around mid-2016, a little later than anticipated in April.” The pair then gained ground on Thursday despite Canadian Foreign Securities Purchases showing an increase to +21.43B, versus +14.23B expected. The rate then made its weekly low of 1.0707 on Friday after Canadian Wholesale Sales increased by +2.2% m/m, versus +0.7% expected, while Canadian Core CPI declined -0.1% m/m, as widely expected and CPI, which increased +0.1%, also as widely anticipated. USD/CAD went on to close at 1.0731, showing a decline of just -2 pips and virtually unchanged on the week. 

NZD/USD Reversed direction, trading lower last week as the United States reported mixed data and with very few economic releases out of New Zealand. The week began with the pair making its weekly high of 0.8821 on Monday in the absence of any significant numbers out of either country. The pair extended its losses on Tuesday after New Zealand CPI increased +0.3% m/m, versus +0.4% expected. The rate continued selling off on Wednesday despite mostly lower than expected U.S. economic numbers. Thursday saw the rate keep heading south as U.S. numbers were mostly mixed. The rate then made its weekly low of 0.8647 on Friday before gaining ground after a lower than expected U.S. consumer sentiment number. NZD/USD went on to close at 0.8681, showing an overall loss of -0.3% for the week.  

The Week Ahead

USD: The upcoming U.S. economic calendar is considerably quieter than last week, featuring CPI data on Tuesday.  Monday is quiet, so Tuesday starts the week’s highlights off with Core CPI (0.2%), CPI (0.3%), and Existing Home Sales (4.98M), while Wednesday’s key events include  Crude Oil Inventories (last -7.5M).  Thursday then features Weekly Initial Jobless Claims (310K), Flash Manufacturing PMI (57.5) and New Home Sales (485K) 504K, while Friday’s important data concludes the week with Core Durable Goods Orders (0.6%) and Durable Goods Orders (0.4%).

AUD: The upcoming Australian economic calendar is less active than last week, featuring speeches by RBA Assistant Governor Debelle and RBA Governor Stevens on Tuesday, and CPI (0.5%) and Trimmed Mean CPI (0.8%) data on Wednesday.  Resistance for AUD/USD is seen at 0.9401/0.9460, 0.9504 and 0.9757, with support noted at 0.9321/0.9360, 0.9200/53 and 0.9112/37.

NZD: The upcoming New Zealand economic calendar is a bit busier than last week, featuring the RBNZ’s Official Cash Rate Decision (a 25 bps rise to 3.50% expected), the RBNZ Rate Statement and the Trade Balance (155M) on Thursday, and ANZ Business Confidence (last 42.8) on Friday. The chart for NZD/USD shows resistance at 0.8777/92 and 0.8834/0.8840.  On the downside, technical support is expected at 0.8640/0.8734 and 0.8536/0.8602.

GBP: The upcoming UK economic calendar is about as active as last week, featuring the BOE’s Official Bank Rate Decision on Wednesday.  Monday is quiet, so Tuesday starts the week’s highlights off with Public Sector Net Borrowing (10.3B) and CBI Industrial Order Expectations (9). Wednesday’s key events then include the MPC Asset Purchase Facility (unchanged at 375B, votes 0-0-9) and the MPC Official Bank Rate (unchanged at 0.50%, votes 0-0-9), BBA Mortgage Approvals (43.4K), CBI Realized Sales (18) and a speech by BOE Governor Carney.  Wednesday then offers nothing of note, while Thursday features Retail Sales (0.2%). Friday’s important data then concludes the week with Preliminary GDP (0.8%). Resistance to the topside for GBP/USD shows at 1.7167/90 and 1.7443, while support for the pair is expected at 1.7035/84, 1.6991/95 and 1.6902/51.

EUR: The upcoming Eurozone economic calendar is busier than last week, featuring the German Ifo Business Climate survey on Friday.  Monday starts the week’s highlights off with the German Buba Monthly Report, and Tuesday and Wednesday are quiet. Thursday’s key events then include the Spanish Unemployment Rate (25.9%), French Flash Manufacturing PMI (48.5), French Flash Services PMI (48.9), German Flash Manufacturing PMI (52.2), German Flash Services PMI (54.7), Flash Manufacturing PMI (52.0), and EZ Flash Services PMI (52.7).  Friday’s important data then concludes the week with the GfK German Consumer Climate survey (8.9), the German Ifo Business Climate survey (109.6), the EZ M3 Money Supply (1.1%) and EZ Private Loans (-1.8%). Resistance for EUR/USD is seen at 1.3561/88, 1.3633/1.3700 and 1.3732/1.3854, with support showing at 1.3476/1.3512 and 1.3294.

JPY: The upcoming Japanese economic calendar is about as quiet as last week, only featuring Trade Balance data (-1.11T) on Thursday and Tokyo Core CPI (2.7%) data on Friday.  Monday is also a Bank Holiday in Japan. Resistance for USD/JPY currently shows up at 101.31/78, 102.12/103.01 and 103.75/104.12, with support indicated at 100.00/101.23 and 96.56.

CAD: The upcoming Canadian economic calendar is considerably quieter than last week, only featuring Core Retail Sales (0.3%) and Retail Sales (0.6%) data on Wednesday.  Resistance for USD/CAD is seen at 1.0736/50, 1.0793 and 1.0813/1.0959, while support shows at 1.0709, 1.0656/79 and 1.0625/29.