AUD Weekly Market Watch 18/08/2014

Last Week recap

EUR/USD Lost another fraction last week after geopolitical tensions and asset flows kept the rate in check and as both economies reported mostly lower than expected economic numbers. The week began on a soft note, with the rate losing ground on Monday in the absence of any significant data from either economy. The pair extended its losses on Tuesday, making its weekly low of 1.3335 after the German ZEW Economic Sentiment Survey printed at 8.6, significantly lower than the expected reading of 18.2; also, EZ ZEW Economic Sentiment came out with a reading of 23.7, versus 41.3 expected. Tuesday’s U.S. numbers had JOLTS Job Openings, showing an increase to +4.67M new jobs in July versus, +4.74M expected. The pair then made its weekly high of 1.3414 on Wednesday before consolidating at a slightly lower level after Eurozone Industrial Production declined -0.3% m/m, versus an expected increase of +0.5%, while U.S. Core Retail Sales increased +0.1% m/m, versus +0.4% expected, and Retail Sales, which came out with a flat reading versus an expected increase of +0.2%. On Thursday, the pair gained fractionally after the ECB’s Monthly Bulletin noted that, “The Governing Council sees both upside and downside risks to the outlook for price developments as limited and broadly balanced over the medium term. In this context, the possible repercussions of heightened geopolitical risks and exchange rate developments will be monitored closely.” and despite French Preliminary GDP, which came out with a flat reading q/q versus +0.1% expected, and German Preliminary GDP, declining -0.2% q/q versus -0.1% expected. Also out were EZ Final CPI, increasing +0.4% y/y as widely anticipated and EZ Flash GDP, which showed a flat reading q/q versus an expected increase of +0.1%. Thursday’s U.S. Initial Jobless Claims came in at 311K, in line with expectations. The rate subsequently recovered most of its weekly losses on Friday after U.S. PPI came in at +0.1% as widely expected, and the Preliminary University of Michigan Consumer Sentiment survey printed at 79.2, versus 82.7 expected. EUR/USD went on to close the week at 1.3397, showing an overall loss of just -10 pips and virtually unchanged on the week.

USD/JPY Resumed its uptrend last week, as the BOJ’ Monetary Policy Meeting Minutes showed no change in stimulus measures and monetary policy, and as Japan reported mixed economic data. The pair began the week on a positive note, with the pair gaining after making its weekly low of 102.01 on Monday after Japanese Tertiary Activity declined -0.1% m/m versus an expected increase of +0.2%. The rate continued higher on Tuesday despite a lower than expected U.S. JOLTS Job Openings number. On Wednesday, the pair extended its gains after the BOJ’s Monetary Policy Meeting Minutes showed no change in rates or stimulus measures, the minutes noted that, “Japan's economy has continued to recover moderately as a trend, although the subsequent decline in demand following the front-loaded increase prior to the consumption tax hike has been observed. Overseas economies -- mainly advanced economies -- have been recovering, albeit with a lacklustre performance still seen in part. Exports have recently levelled off more or less. Business fixed investment has increased moderately as corporate profits have improved. Public investment has more or less levelled off at a high level.” The pair continued rallying on Thursday after Japanese Core Machinery Orders showed an increase of +8.8% m/m, notably lower than the +15.5% anticipated. The rate then declined on Friday after making its weekly high of 102.71 as the United States reported lower than expected consumer sentiment and PPI numbers. USD/JPY went on to close at 102.35, with an overall gain of +0.4% from its previous weekly close.

GBP/USD Continued its decline last week as the BOE’s Inflation Report came out more dovish than expected and with mixed economic numbers from both countries. The week began with Cable gaining fractionally on Monday in the absence of any significant data out of either country. The rate extended its gains on Tuesday after UK BRC Retail Sales Monitor showed a decline of -0.3% y/y versus a previous reading of -0.8%. On Wednesday, Cable dropped sharply after making its weekly high of 1.6843 as the BOE Inflation Report noted that, “At its August meeting, the Committee noted that the central message of that guidance remained relevant: given the likely persistence of the headwinds weighing on the economy, when Bank Rate did begin to rise, it was expected to do so only gradually. Together with the legacy of the financial crisis and broader global forces, this meant that Bank Rate was expected to remain below average historical levels for some time to come. It remained the case, however, that the actual path for monetary policy, even after the first rise in Bank Rate, would remain dependent on economic conditions. In other words, the Committee’s guidance on the likely pace and extent of interest rate rises was an expectation, not a promise.” In addition to the dovish Inflation Report, UK Claimant Count Change showed a decline of -33.6K, versus -29.7K expected with the UK Unemployment Rate holding steady at 6.4%, while the UK Average Earnings Index declined -0.2% 3m/y versus -0.1% expected. Thursday saw the rate consolidate at a slightly lower level after making its weekly low of 1.6656 after U.S. Initial Jobless Claims came out in line with expectations. Cable then traded fractionally higher on Friday after UK Second Estimate GDP increased +0.8% q/q as widely anticipated, which brought the rate to settle at 1.6685, showing an overall weekly decline of -0.5%.

AUD/USD Reversed direction gaining ground last week, as asset flows favoured the commodity currencies over the Greenback and with both countries reporting mixed economic data. The week began on a soft note, with the pair losing ground on Monday in the absence of any significant data out of either country. The rate then made its weekly low of 0.9246 before consolidating at a slightly higher level after Australian NAB Business Confidence printed at 11, versus a previous reading of 8, while Australian HPI increased +1.8% q/q, versus +1.1% expected. The pair extended its gains, rising sharply on Wednesday after Australian Westpac Consumer Sentiment increased +3.8% versus a previous reading of +1.9%, and the Australian Wage Price Index, which increased +0.6% q/q versus +0.8% expected. The rate continued rallying on Thursday despite Australian MI Inflation Expectations increasing +3.1% versus a previous reading of +3.8%. On Friday, the pair made its weekly high of 0.9333 after lower than expected U.S. PPI and consumer sentiment data. AUD/USD went on to close at 0.9316, showing an overall gain of +0.5% for the week.

USD/CAD Traded lower last week after Canada revised its July jobs data and with mixed economic numbers from both countries. The week began with the rate dropping sharply after making its weekly high of 1.0976 on Monday after Canadian Housing Starts increased to +200K, versus +194K expected. The rate consolidated at a slightly higher level on Tuesday despite a lower than expected U.S. JOLTS Job Openings number. On Wednesday, the pair resumed its decline after the United States reported lower than expected Retail Sales and Core Retail Sales data.  The rate continued heading south on Thursday after Canadian NHPI increased +0.2% m/m as was widely anticipated. The rate then made its weekly low of 1.0859 on Friday after Statistics Canada revised its July employment data to show an additional +41.7K jobs, versus a previously (erroneously) released increase of only +0.2K and significantly higher than the expected increase of +25.4K. Also out on Friday was Canadian Manufacturing Sales, increasing +0.6% m/m as widely anticipated. USD/CAD went on to close the week at 1.0896, showing an overall loss of -0.7% from its previous weekly close.

NZD/USD Rose last week, gaining ground as asset flows favoured the Kiwi over the Greenback and with New Zealand economic numbers meeting analyst expectations. The week began with the rate consolidating at a slightly lower level in the absence of any significant data out of either country. The pair continued selling off on Tuesday, making its weekly low of 0.8406 despite a lower than expected U.S. JOLTS Job Openings number. On Wednesday, the rate increased after lower U.S. Retail Sales data, while New Zealand Retail Sales rose +1.2% q/q, versus +1.0% expected and NZ Core Retail Sales, also increasing +1.2%, versus +1.1% anticipated. The pair extended its gains on Thursday, making its weekly high of 0.8513 as U.S. Initial Jobless Claims came in as expected. The rate then declined somewhat on Friday after lower than expected U.S. PPI and consumer sentiment data. NZD/USD went on to close at 0.8478, showing an increase of +0.3% for the week. 

The Week Ahead

USD: The upcoming U.S. economic calendar is about as active as last week, featuring the FOMC Meeting Minutes on Wednesday. Monday starts the week’s highlights off with the NAHB Housing Market Index (53) , and Tuesday’s key events include Building Permits (1.00M), CPI (0.1%), Core CPI (0.2%) and Housing Starts (0.97M). Wednesday then features Crude Oil Inventories (last 1.4M) and the FOMC Meeting Minutes, while Thursday offers Weekly Initial Jobless Claims (299K), Flash Manufacturing PMI (55.7), Existing Home Sales (5.01M), the Philly Fed Manufacturing Index (20.3), and the first day of the Jackson Hole Economic Symposium hosted by the Kansas City Fed. Friday’s important events then conclude the week with a speech by Fed Chair Yellen and the second day of the Jackson Hole Symposium, which finishes on Saturday.

AUD: The upcoming Australian economic calendar is more active than last week, featuring the RBA’s Monetary Policy Meeting Minutes on Tuesday. Monday starts the week’s highlights off with New Motor Vehicle Sales (last 1.7%), and Tuesday’s key events include the RBA’s Monetary Policy Meeting Minutes. Wednesday then features a speech by RBA Governor Stevens, while Thursday offers the CB Leading Index (last 0.2%). The Jackson Hole Symposium then concludes the week’s important events on Friday and Saturday. Resistance for AUD/USD is seen at 0.9321/0.9373, 0.9401/0.9469 and 0.9504, with support noted at 0.9274, 0.9200/53 and 0.9112/37.

NZD: The upcoming New Zealand economic calendar is a bit quieter than last week, only featuring PPI Input (0.7%) and Inflation Expectations (last 2.4%) on Tuesday, as well as the Jackson Hole Symposium on Friday and Saturday. The chart for NZD/USD shows resistance at 0.8512/0.8602, 0.8640/0.8734 and 0.8777/0.8840.  On the downside, technical support is expected at 0.8459/61, 0.8390/0.8430 and 0.8240.

GBP: The upcoming UK economic calendar is busier than last week, featuring the BOE’s Rate Decision on Wednesday. Monday is quiet, so Tuesday starts the week’s highlights off with CPI (1.8%), PPI Input (-0.8%) and RPI (2.6%).  Wednesday’s key events then include the MPC Asset Purchase Facility (375B, votes 0-0-9 0-0-9) and the MPC Official Bank Rate Decision (0.50%, votes 0-0-9), while Thursday features Retail Sales (0.4%), Public Sector Net Borrowing (10.1B) and the first day of the Jackson Hole Symposium. The week concludes with the Jackson Hole Symposium on Friday and Saturday. Resistance to the topside for GBP/USD shows at 1.6730/65, 1.6822/1.6951 and 1.6991/1.7084, while support for the pair is expected at 1.6656/67, 1.6582 and 1.6251/1.6309.

EUR: The upcoming Eurozone economic calendar is as active as last week, featuring a speech by ECB President Draghi on Friday. Monday starts the week’s highlights off with the German Buba Monthly Report, and Tuesday and Wednesday offer nothing notable. Thursday’s key events then include French Flash Manufacturing PMI (47.9), French Flash Services PMI (50.3), German Flash Manufacturing PMI (51.8), German Flash Services PMI (55.5), EZ Flash Manufacturing PMI (51.4), EZ Flash Services PMI (53.6) and the first day of the Jackson Hole Symposium. The week’s highlights conclude with the Jackson Hole Symposium on Friday and Saturday. Resistance for EUR/USD is seen at 1.3411/1.3512, 1.3548/88 and 1.3633/1.3700, with support showing at 1.3366, 1.3332/35 and 1.3294.

JPY: The upcoming Japanese economic calendar is quieter than last week, only featuring the Trade Balance (-0.77T) on Wednesday, and the Jackson Hole Symposium on Friday and Saturday. Resistance for USD/JPY currently shows up at 102.71/103. 07, 103.75/104.12 and 105.43, with support indicated at 101.31/102.12, 100.00/101.23 and 96.56.

CAD: The upcoming Canadian economic calendar is busier than last week, featuring CPI data on Friday. Monday starts the week’s highlights off with Foreign Securities Purchases (14.68B), and Tuesday is quiet. Wednesday’s key events then include Wholesale Sales (1.3%), while Thursday features the first day of the Jackson Hole Symposium that will run through Saturday. The week’s important data concludes on Friday with Core CPI (0.0%), CPI (-0.1%), Core Retail Sales (0.6%) and Retail Sales (0.6%).Resistance for USD/CAD is seen at 1.0903, 1.0943/85 and 1.1052, while support shows at 1.0859, 1.0709/1.0813 and 1.0693/95.