AUD Weekly Market Watch 27/10/2014

Last Week recap

EUR/USD Reversed direction, losing ground last week as asset flows favoured the Greenback over the Euro and with both economies reporting mixed economic numbers. The week began with the rate gaining on Monday despite the Bundesbank’s Monthly Report indicating that the German economy had barely grown in the quarter with an equally pessimistic forecast for the fourth quarter. The pair then began selling off on Tuesday after making its weekly high of 1.2839 as the United States reported Existing Home Sales had increased an annualized +5.17M compared to an expected +5.11M. On Wednesday, the pair extended its losses after U.S. CPI increased +0.1% m/m versus an expected flat reading, while Core CPI increased +0.1% compared to an expected increase of +0.2%. The rate then consolidated at a slightly higher level on Thursday after making its weekly low of 1.2613 as German Flash Manufacturing PMI printed at 51.8 versus 49.6 expected, while French Flash Manufacturing PMI showed a reading of 47.3 compared to an expected print of 48.6. Also, U.S. Initial Jobless Claims rose to 283K versus 269K expected, while U.S. Flash Manufacturing PMI printed at 56.2 versus an expected reading of 57.2. The pair increased on Friday after U.S. New Home Sales increased to an annualized 467K from a previous 466K downwardly revised from 504K with expectations of 473K. Also, GfK German Consumer Climate printed at 56.2 versus 57.2 expected. EUR/USD went on to close at 1.2669, with an overall weekly loss of -0.7%. Over the weekend, the ECB announced that 25 out of 130 European banks overseen by the ECB had capital shortfalls under an “adverse” economic scenario.

USD/JPY Gained ground last week as the United States reported mixed economic numbers and with very little economic data out of Japan. The week began with the pair consolidating at a slightly lower level in the absence of any significant data out of either country. The pair then gained ground on Tuesday after making its weekly low of 106.24 as U.S. Existing Home Sales came out better than expected. On Wednesday, the rate extended its gains after the Japanese Trade Balance came out with a deficit of -1.07T versus -0.91T expected and mixed CPI data from the United States. The pair then increased sharply on Thursday despite Japanese Flash Manufacturing PMI printing at 52.8 versus an expected reading of 52.1. The pair then declined on Friday as traders squared positions and after a lower than expected U.S. New Home Sales number. USD/JPY went on to close at 108.14, up +1.0% from its previous weekly close.

GBP/USD Ended its second week with no change as the BOE released its Meeting Minutes for its October rate decision and with mixed economic data out of both countries. The week began with Cable gaining on Monday in the absence of any significant data out of either country. Tuesday, the pair declined after making its weekly high of 1.6183 as UK Public Sector Net Borrowing came to 11.1B versus 9.3B expected. Cable continued selling off on Wednesday after the BOE MPC Meeting Minutes showed two dissenting votes — members Weale and McCafferty — to raise the Official Bank Rate by 25 bps, while the committee voted unanimously on keeping the Asset Purchase Facility at 375B. The pair continued weakening on Thursday after UK Retail Sales declined -0.3% m/m compared to an expected decline of -0.1%, and UK BBA Mortgage Approvals, which showed 39.3K new approvals for September versus 41.5K expected. Also pressuring Cable on Thursday was CBI Industrial Order Expectations, which printed at -6 compared to an expected reading of -3. Cable then gained ground on Friday after UK Preliminary GDP increased +0.7% q/q, in line with expectations. GBP/USD closed the week at 1.6087, showing no change from its previous weekly close.

AUD/USD Extended its previous week’s gains last week as the RBA’s Monetary Policy Meeting Minutes showed little change from its previous month’s statement and with mostly mixed economic data out of both countries. The week began with the pair gaining on Monday in the absence of any economic numbers out of either country. The pair then declined on Tuesday after making its weekly high of 0.8831 after the RBA’s Monetary Policy Meeting Minutes stated, “despite the easing in financial conditions associated with the depreciation of the Australian dollar, the exchange rate remained high by historical standards – particularly given recent declines in key commodity prices – and was offering less assistance than would normally be expected in achieving balanced growth in the economy”. On Wednesday, the pair continued heading south after Australian CPI increased +0.5% q/q versus an expected increase of +0.4%, while Trimmed Mean CPI increased +0.4% versus +0.6% expected. The rate then consolidated at a slightly lower level on Thursday after the Australian NAB Quarterly Business Confidence index printed at 6, showing no change from its previous reading. The pair then increased on Friday after making its weekly low of 0.8717 as the United States reported a lower than expected New Home Sales number. AUD/USD closed at 0.8792, showing an overall gain of +0.3% for the week.

USD/CAD Extended its previous week’s gains last week as the BOC left rates unchanged and after lower than expected Canadian economic data. The week began with the pair consolidating at a slightly higher level on Monday after Canadian Wholesale Sales increased +0.2% m/m as was widely anticipated. The pair then dropped sharply on Tuesday after making its weekly high of 1.1295 despite a better than expected U.S. housing number. On Wednesday, the rate rallied after making its weekly low of 1.1183 after the BOC left its benchmark Overnight Rate unchanged at 1.0%. The central bank’s Monetary Policy Report stated that, “Market sentiment has deteriorated in recent weeks, as evidenced by a repricing of riskier assets. Even with this repricing, however, financial conditions remain accommodative. Credit spreads, especially in the lower-rated credits, as well as bond spreads for emerging markets, have widened from their recent compressed levels, but remain tight by historical standards.” Also out were Canadian Core Retail Sales, which declined -0.3% m/m versus an expected increase of +0.2%, and Retail Sales, which dropped -0.3% m/m versus an expected rise of +0.1%. The pair then declined on Thursday after disappointing U.S. Initial Jobless Claims and Flash Manufacturing PMI data. The rate then consolidated at a slightly higher level on Friday despite a lower than expected U.S. housing number, which brought USD/CAD to close at 1.1233, showing an overall gain of +0.4% on the week. 

NZD/USD Reversed direction, losing ground last week as New Zealand reported lower than expected CPI and Trade Balance data. The week began with the pair gaining on Monday in the absence of any significant numbers out of either country. The rate then consolidated at a slightly lower level on Tuesday after making its weekly high of 0.8032 after a better than expected U.S. Existing Home Sales number. On Wednesday, the pair extended its losses after New Zealand CPI increased +0.3% m/m versus an expected increase of +0.5%. The pair continued selling off on Thursday, making its weekly low of 0.7791 after the New Zealand Trade Balance showed an expanding deficit of -1.35B, significantly worse than the -620M deficit that was expected, with the previous number upwardly revised from -472M to -489M. The pair then gained ground on Friday after a lower than expected U.S. New Home Sales number. NZD/USD went on to close at 0.7848, with an overall weekly decline of -1.0%.

The Week Ahead

USD: The U.S. economic calendar is quite active this coming week, featuring the FOMC’s Rate Statement and Fed Funds Rate Decision on Thursday.  Monday starts the week’s highlights off with Pending Home Sales (+1.1%), and Tuesday’s key events include CB Consumer Confidence (+0.5%), Core Durable Goods Orders (+0.5%) and Durable Goods Orders (+0.4%).  Wednesday then features the FOMC Statement and the Federal Funds Rate Decision (unchanged at <0.25%), while Thursday offers Advance GDP (+3.1%), Weekly Initial Jobless Claims (277K), the Advance GDP Price Index (2.0%) and a speech by Fed Chair Janet Yellen. Friday’s important data then concludes the week with Chicago PMI (60.2), Revised University of Michigan Consumer Sentiment (86.4), U.S. Personal Spending (+0.2%), the Core PCE Price Index (+0.1%) and the Employment Cost Index (+0.6%).

AUD: The Australian economic calendar is quiet this coming week, only featuring Import Prices (0.3%) on Thursday and PPI (last -0.1%) on Friday. Resistance for AUD/USD is seen at 0.8920, 0.8889/97 and 0.8823/60, with support noted at 0.8729, 0.8679 and 0.8641/59.

NZD: The New Zealand economic calendar is a bit busier this coming week, featuring the RBNZ’s Official Cash Rate Decision (unchanged at 3.5%), the RBNZ Rate Statement and ANZ Business Confidence (last 13.4) on Wednesday, as well as Building Consents (last 0.0%) on Thursday. The chart for NZD/USD shows resistance at 0.7972/95, 0.7927 and 0.7859/75. On the downside, technical support is expected at 0.7751/91, 0.7705/35 and 0.7605/97.

GBP: The UK economic calendar is moderately active this coming week, featuring Nationwide HPI data on Thursday.  Monday starts the week’s highlights off with CBI Realized Sales (29) and a speech by MPC member Shafik, and Tuesday’s key events include a speech by MPC member Cunliffe.  Wednesday then features Net Lending to Individuals (+2.8B) and a speech by MPC member Haldane, while Thursday offers Nationwide HPI (+0.4%) and another speech by MPC member Cunliffe. That concludes the week’s highlights, since Friday has nothing notable scheduled. Resistance to the topside for GBP/USD shows at 1.6204/26, 1.6161/83 and 1.6098, while support for the pair is expected at 11.5994/1.6008, 1.5948/61 and 1.5874/1.5927.

EUR: The Eurozone economic calendar is quite active this coming week, featuring the Eurozone Bank Stress Tests on Sunday.  On Sunday, the ECB will announce its Bank Stress Results to start the week’s highlights. Monday then follows with German Ifo Business Climate (104.6), the EZ M3 Money Supply (+2.2%) and Private Loans (-1.3%), while Tuesday’s key events include German Import Prices (-0.1%).  Wednesday then features the tentatively scheduled German 10-year Bond Auction, while Thursday offers German Preliminary CPI (-0.1%), Spanish Flash CPI (0.0%), Spanish Flash GDP (+0.5%), German Unemployment Change (+4K) and the tentatively scheduled Italian 10-year Bond Auction. Friday’s important data then concludes the week with the EZ CPI Flash Estimate (+0.4%), German Retail Sales (-0.8%), French Consumer Spending (-0.3%), the EZ Core CPI Flash Estimate (+0.8%) and the EZ Unemployment Rate (11.5%). Resistance for EUR/USD is seen at 1.2791, 1.2715 and 1.2695, with support showing at 1.2661/63, 1.2613/25 and 1.2588/89.

JPY: The Japanese economic calendar is moderately active this coming week, featuring The BOJ’s Monetary Policy Statement on Friday.  Monday is quiet, so Tuesday starts the week’s highlights off with Retail Sales (+0.9%). Wednesday’s key events then include Preliminary Industrial Production (+2.3%), while Thursday offers nothing notable. Friday’s important data then concludes the week with Household Spending (-4.0%), Tokyo Core CPI (+2.5%), National Core CPI (+3.0), the Unemployment Rate (3.6%), Housing Starts (-17.1%), the BOJ’s Outlook Report and the tentatively scheduled BOJ’s Monetary Policy Statement and Press Conference. Resistance for USD/JPY currently shows up at 109.45/74, 108.53/98 and 108.24/34, with support indicated at 107.38/39, 106.80 and 106.24.

CAD: The Canadian economic calendar is rather quiet this coming week, only featuring the RMPI (1.5%) and a speech by BOC Governor Poloz on Wednesday, and GDP (0.0%) on Friday.  Resistance for USD/CAD is seen at 1.1384, 1.1295 and 1.1269/77, while support shows at 1.1222/29, 1.1158/94 and 1.1070/97.