AUD Weekly Market Watch 24/11/2014

Last Week recap

EUR/USD resumed its downtrend last week after dovish comments from ECB President Mario Draghi and as the FOMC Meeting Minutes indicated members had confidence in the strength of the U.S. economy. The week began with the pair selling off on Monday after the ECB’s Draghi said in a speech that, “Risks to the economic outlook continue to be on the downside. In particular, the weakening in the euro area's growth momentum, alongside heightened geopolitical risks, could dampen confidence and, in particular, private investment.” Monday’s economic data had U.S. Industrial Production decline -0.1% versus an expected increase of +0.2%, while the U.S. Capacity Utilization Rate showed 78.9% compared to an anticipated 79.3%. The rate then recovered on Tuesday after German ZEW Economic Sentiment printed at 11.5, significantly higher than the expected 0.9 print, while Eurozone ZEW Economic Sentiment printed at 11.0, also notably higher than the expected 4.3 number that was anticipated. Tuesday’s U.S. data had PPI increase +0.2% m/m compared to an expected decrease of -0.1%, while the Core number came out at +0.4% versus +0.2% expected. On Wednesday, the pair made its weekly high of 1.2599 as the FOMC Meeting Minutes showed members confident of the economy and that the 2% inflation target would be met, nevertheless, the statement noted that, “If foreign economic or financial conditions deteriorated further, US economic growth over the medium term might be slower than currently expected”. Also out were U.S. Building Permits, which increased to 1.08M versus 1.04M expected and Housing Starts, dropping to 1.01M, in line with expectations. The rate then consolidated at a slightly lower level on Thursday after lower than expected European PMI numbers: German Flash Manufacturing PMI printed at 50.0 versus 51.5 expected with German Flash Services PMI at 52.1 versus 54.5 anticipated; French Flash Manufacturing PMI at 47.6 compared to 48.9 expected and French Flash Services PMI at 48.8, in line with expectations. U.S. data had CPI print at 0.0% m/m compared to an expected decline of -0.1%, while Core CPI increased +0.2% m/m as was widely anticipated. The pair then declined sharply on Friday, making its weekly low of 1.2374 after comments from ECB President Draghi, who said that, “If on its current trajectory our policy is not effective enough to achieve this, or further risks to the inflation outlook materialize, we would step up the pressure and broaden even more the channels through which we intervene, by altering accordingly the size, pace and composition of our purchases.” EUR/USD went on to close at 1.2387, showing an overall loss of -1.1% from its previous weekly close. 

USD/JPY extended its gains last week as the BOJ’s Monetary Policy Statement showed the bank had left monetary policy unchanged and Prime Minister Shinzo Abe formally called for early elections to salvage his economic plan and to gain support for delaying a second sales tax hike next October. The week began with the rate consolidating at a slightly higher level after making its weekly low of 115.45 on Monday after Japanese Preliminary GDP declined -0.4% q/q, significantly lower than the expected increase of +0.5% that was expected. The pair continued higher on Tuesday after Japanese PM Abe announced a snap election dissolving the Japanese Parliament on November 21st for elections to be held within 40 days, which would make the date for elections December 14th. Also, Abe wants to push the October 2015 sales tax hike out 18 months. On Wednesday, the pair continued sharply higher after the BOJ’s Monetary Policy Statement showed no change to the central bank’s monetary policy, stating that, “With regard to the outlook, Japan's economy is expected to continue its moderate recovery trend, and the effects including those of the subsequent decline in demand following the front-loaded increase prior to the consumption tax hike are expected to dissipate gradually.” The rate then made its weekly high of 118.97 on Thursday after the Japanese Trade Balance came out showing a deficit of -0.98T, in line with expectations. Friday saw the pair retreat on position squaring and in the absence of any significant data out of either country, which brought USD/JPY to close at 117.80, showing an increase of +1.3% for the week. 

GBP/USD showed little change last week as the BOE’s MPC Meeting Minutes continued showing two members dissented on interest rates with a unanimous vote on the size of the Asset Purchase Facility. The week began on a soft note, with Cable declining despite lower than expected U.S. economic data. The rate then consolidated at a slightly lower level on Tuesday after better than expected U.S. PPI data and despite UK CPI increasing to 1.3% y/y versus 1.2% expected. Also out were UK PPI Input, which declined -1.5%, in line with expectations, and RPI, which increased +2.3% y/y, also as widely anticipated. On Wednesday, Cable gained ground after making its weekly low of 1.5589 after the MPC Monetary Policy Meeting Minutes showed two dissenting votes on the Official Bank Rate at 0.50%, and a unanimous vote on the size of the Asset Purchase Facility at 375B. The minutes stated that, “There was a risk that growth might soften further than anticipated and that inflation might persist below the target for longer than expected. In that case a premature tightening in policy would leave the economy vulnerable to shocks, with the scope for any stimulus that subsequently became necessary being limited by the effective lower bound on interest rates.” The rate then made its weekly high of 1.5736 on Thursday after UK Retail Sales increased +0.8% m/m compared to +0.4% expected. Cable then sold off on Friday despite UK Public Sector Net Borrowing came out at +7.1B versus +6.9B expected. GBP/USD went on to close at 1.5652, showing an overall decline of just -12 pips and virtually unchanged for the week.  

AUD/USD lost ground last week as the RBA’s Monetary Policy Meeting Minutes for its November meeting showed the central bank was committed to a period of stability in interest rates and with mixed numbers out of both countries. The week began with the pair declining after making its weekly high of 0.8795 on Monday after Australian New Motor Vehicle Sales declined -1.6% m/m compared to a previous increase of +2.8%. The rate then gained on Tuesday after the RBA’s Monetary Policy Meeting Minutes stated that, “After having depreciated noticeably in September, the Australian dollar was little changed against the US dollar in October. The Australian dollar had appreciated by 4 per cent against the Japanese yen, which has a 13 per cent weight in the trade-weighted basket. In trade-weighted terms, the Australian dollar ended the month higher than in January 2014, notwithstanding the significant declines in key commodity prices since then.” The rate then declined sharply on Wednesday after the FOMC Meeting Minutes showed policymakers’ confidence in the U.S. economy. On Thursday, the pair recovered somewhat after making its weekly low of 0.8565 as the United States reported mixed economic numbers. The pair continued gaining on Friday in the absence of any significant data out of either country. AUD/USD closed at 0.8666, showing an overall decline of -0.9% from its previous weekly close. 

USD/CAD extended its losses last week as Canada reported mostly better than expected economic numbers with mixed data out of the United States. The week began on a quiet note, with the rate consolidating at a slightly higher level on Monday after Canadian Foreign Securities Purchases declined to 4.37B, versus an expected 11.32B. The pair then gained a fraction on Tuesday after better than expected U.S. PPI data. On Wednesday, the rate extended its gains after a somewhat hawkish FOMC Meeting Minutes. The pair then declined on Thursday after making its weekly high of 1.1368 as Canadian Wholesale Sales increased +1.8% m/m compared to an expected increase of +0.7%. The rate continued its sharp decline on Friday after Canadian CPI increased to +0.1% m/m, significantly higher than the expected decline of -0.3% that was expected, while Core CPI increased +0.3% compared to an expected increase of +0.2%, which brought USD/CAD to close at 1.1230, showing a loss of -0.5% for the week. 

NZD/USD lost a fraction last week as both countries reported mixed economic data. The week began on a positive note as the pair gapped higher on the open Monday making its weekly high of 0.7973 after New Zealand Retail Sales increased +1.5% q/q versus +0.8% expected, while Core Retail Sales increased +1.4% q/q versus +1.0% anticipated. The rate then consolidated at a slightly higher level on Tuesday after lower than expected U.S. economic data. On Wednesday, the rate dropped sharply after the release of the FOMC Meeting Minutes. The pair then made its weekly low of 0.7805 on Thursday after mixed economic data out of the United States. The rate continued gaining on Friday in the absence of any significant economic numbers out of either country. NZD/USD went on to close at 0.7879, with an overall loss of -0.3% for the week. 

The Week Ahead

USD: The U.S. economic calendar is moderately active this coming week, featuring Preliminary GDP data on Tuesday.  Monday is quiet, so Tuesday starts the week’s highlights off with Preliminary GDP (3.3%) and CB Consumer Confidence (95.9).  Wednesday’s key events then include Core Durable Goods Orders (0.5%), Weekly Initial Jobless Claims (287K), the Core PCE Price Index (0.1%), Durable Goods Orders (-0.4%), Personal Spending (0.4%), the Chicago PMI (63.1), the Revised University of Michigan Consumer Sentiment survey (90.2), New Home Sales (471K), Pending Home Sales (0.9%), and Crude Oil Inventories (last 2.6M).  Thursday features the OPEC Meetings and is the U.S. Thanksgiving Day Holiday, while Friday offers nothing notable.

AUD: The Australian economic calendar is rather quiet this coming week, featuring Private Capital Expenditure data (-1.7%) on Thursday.  The only other significant highlights for the week will be a speech by RBA Deputy Governor Lowe on Tuesday, Construction Work Done (-1.7%) on Wednesday and the OPEC Meetings on Thursday. Resistance for AUD/USD is seen at 0.8910, 0.8823/60 and 0.8722/95, with support noted at 0.8679, 0.8641/59 and 0.8540/65.

NZD: The New Zealand economic calendar is a bit busier this coming week, featuring Trade Balance data on Wednesday.  Monday is quiet, so Tuesday starts the week’s highlights off with Inflation Expectations (2.2%), and Wednesday’s key events include the Trade Balance (-645M).  Thursday then features the OPEC Meetings and Building Consents (-12.2%), while Friday’s important data concludes the week with the ANZ Business Confidence survey (last 26.5). The chart for NZD/USD shows resistance at 0.7927/45, 0.7973/94 and 0.8032. On the downside, technical support is expected at 0.7859/78, 0.7705/0.7805 and 0.7605/97.

GBP: The UK economic calendar is moderately busy this coming week, featuring the Inflation Report Hearings on Tuesday.  Monday is quiet, so Tuesday starts the week’s highlights off with BBA Mortgage Approvals (38.5K0 and the Inflation Report Hearings. Wednesday’s key events then include the Second Estimate of GDP (0.7%), Preliminary Business Investment (2.3%), and CBI Realized Sales (28).  Thursday features the OPEC Meetings, while Friday’s important data then concludes the week with Nationwide HPI (0.4%). Resistance to the topside for GBP/USD shows at 1.5994/1.6008, 1.5868/1.5961 and 1.5736/50, while support for the pair is expected at 1.5589/92 and 1.5267.

EUR: The Eurozone economic calendar is quite active this coming week, featuring CPI data on Thursday and Friday.  Monday starts the week’s highlights off with the German Ifo Business Climate survey (103.0), and Tuesday is quiet. Wednesday’s key events then include the tentatively scheduled German 10-year Bond Auction (last average yield 0.87% with a 1.2 bid-to-cover ratio), while Thursday features German Preliminary CPI (0.0%), Spanish Flash CPI (-0.3%), German Unemployment Change (-1K), the EZ M3 Money Supply (2.6%), EZ Private Loans (-1.0%), the OPEC Meetings, the tentatively scheduled Italian 10-year Bond Auction (last average yield 2.44%, with a 1.5 bid-to-cover ratio), and German Consumer Climate (8.6). Friday’s important data then concludes the week with German Retail Sales (1.7%), French Consumer Spending (0.2%), the EZ CPI Flash Estimate (0.3%), the EZ Core CPI Flash Estimate (0.7%), and the EZ Unemployment Rate (11.5%). Resistance for EUR/USD is seen at 1.2374/98, 1.2485/1.2500, and 1.2545/1.2613, with support showing at 1.2357/62 and 1.2134.

JPY: The Japanese economic calendar is busier than usual this coming week, featuring a speech by BOJ Governor Kuroda on Tuesday.  Monday is a Bank Holiday, so Tuesday starts the week’s highlights off with the BOJ’s Monetary Policy Meeting Minutes and a speech by BOJ Governor Kuroda. Wednesday is quiet, while Thursday’s key events then include the OPEC Meetings.  Friday’s important data then concludes the week with Household Spending (-4.8%), Tokyo Core CPI (2.3%), Preliminary Industrial Production (-0.4%) and Retail Sales (1.5%). Resistance for USD/JPY currently shows up at 118.97 and 117.94, with support indicated at 117.35, 116.82 and 115.58.

CAD: The Canadian economic calendar is somewhat active this coming week, featuring GDP data on Friday.  Monday offers nothing of note, so Tuesday starts the week’s highlights off with Core Retail Sales (0.4%) and Retail Sales (0.6%). Wednesday is quiet, while Thursday’s key events then include the OPEC Meetings and Current Account (-10.3B).  Friday’s important data then concludes the week with GDP (0.4%) and the RMPI (1.5%). Resistance for USD/CAD is seen at 1.1368/1.1400, 1.1295/1.1331 and 1.1259/63, while support shows at 1.1222/29 and 1.1121/94.