AUD Weekly Market Watch 15/12/2014

Last Week recap

EUR/USD reversed direction, gaining ground last week as the ECB made loans to European banks through its TLTRO or Targeted Long Term Refinancing Option, and despite mostly better than expected U.S. economic numbers.  The week began on a positive note, with the rate rallying after making its weekly low of 1.2246 on Monday despite comments from ECB governing council member Nowotny, who stated that there is a "massive weakening in the Eurozone economy” warning that, "for the first quarter of 2015 we must expect falling inflation rates with a large probability.” EZ numbers had German Industrial Production increase +0.2% m/m, in line with expectations, while the Sentix Investor Confidence index declined to -2.5, versus -9.9 expected. The pair continued higher on Tuesday after the German Trade Balance showed a surplus of +20.6B versus +18.1B expected. U.S. numbers had JOLTS Job Openings show an increase to 4.83M, in line with expectations. The rate extended its gains on Wednesday despite French Industrial Production showing a decrease of -0.8% m/m versus an expected increase of +0.2%. The pair then made its weekly high of 1.2494 before selling off after the ECB’s Targeted LTRO showed the central bank had loaned only €129.8B versus analyst expectations of €148.2B. Also pressuring the rate was U.S. Retail Sales, which increased +0.7% m/m compared to an expected +0.4% rise, while Core Retail Sales increased +0.5% m/m versus +0.1% expected; both previous numbers were revised up to +0.5% and +0.4% respectively from +0.3%. In addition, weekly Initial Jobless Claims came in at 294K, slightly better than the 299K that was expected. Friday saw the pair resume its rally after crude oil broke the $60 per barrel level and despite EZ Industrial Production, which increased +0.1% m/m compared to an expected increase of +0.2%, while U.S. PPI declined -0.2% versus -0.1% expected with the Core number coming out flat, versus an expected increase of +0.1%. EUR/USD went on to close at 1.2461, with an overall gain of +1.4% from its previous weekly close.

USD/JPY reversed direction, losing ground last week as asset flows favoured the Yen over the Greenback and with both countries reporting mixed economic data. The week began with the pair making its weekly high of 121.84 on Monday before selling off after the Japanese Current Account increased to +0.95T, more than double the expected +0.46T that was expected, also out was Japanese Final GDP, which declined -0.5% q/q compared to -0.1% expected. The rate continued lower on Tuesday after U.S. JOLTS Job Openings came out in line with expectations and despite the Japanese BSI Manufacturing Index printing at 8.1, significantly lower than the expected reading of 13.1. On Wednesday, the pair extended its losses despite Japanese Tertiary Industry Activity declining -0.2% m/m compared to an expected decline of -0.1% and Core Machinery Orders, which fell -6.4% m/m compared to an expected decline of -2.1%. The pair then made its weekly low of 117.43 on Thursday before trading higher after positive U.S. Retail Sales and employment data. The rate then resumed its decline on Friday after Japanese Revised Industrial Production increased +0.4% m/m versus +0.2% expected, which brought USD/JPY to close at 118.75, showing an overall decline of -2.3% for the week. Sunday saw PM Abe’s Liberal Democratic Party win a two-thirds majority in the Japanese Parliament’s Lower House elections. The coalition won 325 of 475 seats with two seats still undeclared as of this writing. 

GBP/USD gained ground last week as asset flows favoured Sterling over the Greenback and despite mostly lower UK economic data. The week began with the pair making its weekly low of 1.5540 in the absence of any significant data out of either country. Cable continued gaining moderately on Tuesday despite UK Manufacturing Production showing a decline of -0.7% m/m compared to an expected increase of +0.2%, while the UK NIESR GDP Estimate came in at +0.7%, showing no change from its previous reading . The rate extended its gains on Wednesday after the UK Trade Balance showed a deficit of -9.6B, in line with expectations. Cable then made its weekly high of 1.5756 on Thursday after crude oil broke the $60 per barrel level and despite better than expected U.S. Retail Sales and employment data. The pair lost ground on Friday in the wake of UK Construction Output, which declined -2.2% m/m compared to an expected increase of +0.8%. GBP/USD went on to close at 1.5705, with an overall weekly gain of +0.8%.

AUD/USD extended its previous week’s losses last week as the price of oil fell to new recent lows and despite mostly better than expected economic data out of Australia. The week began with the pair consolidating at a slightly lower level on Monday after Australian ANZ Job Advertisements increased +0.7% m/m versus a previous reading of +0.2%. The pair continued fractionally lower on Tuesday after the Australian NAB Business Confidence index showed a reading of 1 compared to a previous print of 5 upwardly revised from 4. On Wednesday, the rate gained after the release of Australian Home Loans, which increased +0.3% m/m versus an expected increase of +0.1%. The pair then made both its weekly high of 0.8375 and its weekly low of 0.8213 on Thursday as the price of crude oil dropped below the $60 per barrel level and despite Australian Employment Change, which increased +42.7K versus an expected +15.2K with the previous number significantly revised lower from +24.1K to +13.7K. Also out were Australian MI Inflation Expectations, which showed a reading of +3.4% compared to a previous reading of +4.1%. The pair resumed its selloff on Friday despite lower than expected U.S. PPI data. AUD/USD went on to close at 0.8239, with an overall decline of -0.9% from its previous weekly close. 

USD/CAD extended its previous week’s gains last week as the price of oil got pummeled and with mixed economic data out of both countries.  The week began on a positive note, with the rate increasing after Canadian Housing Starts came out at 196K versus 201K expected, and Canadian Building Permits, which increased only +0.7% compared to an expected increase of +2.1%. The pair then made its weekly low of 1.1396 on Tuesday as asset flows favoured the Loonie over the Greenback and with no significant data out of Canada. The pair then resumed its rally on Wednesday after the United States reported a surplus of oil inventories. On Thursday, the pair continued gaining after comments from BOC Governor Poloz, stating that, “Financial regulation is costly, but that cost pales compared with the fallout from the financial crisis,” he continued saying, “We are still paying for that. Global regulatory reform was absolutely essential. No amount of regulation can snuff out the forces of competition. Competition is a force of nature and it is going to manifest itself in some way for there is a lot of money at stake”. Also out on Thursday was Canadian NHPI, which increased +0.1% m/m versus +0.2% expected. The rate then made its weekly high of 1.1590 on Friday despite lower than expected U.S. PPI data. USD/CAD went on to close at 1.1576, showing an overall weekly gain of +1.3%.

NZD/USD reversed direction, gaining ground last week as the RBNZ left rates unchanged and with mixed economic data out of the United States. The week began with the pair declining on Monday in the absence of any significant data out of either country. The rate then made its weekly low of 0.7607 before gaining ground on Tuesday as the United States reported JOLTS Job Openings in line with expectations. The pair then rallied sharply on Wednesday after the RBNZ left its benchmark Overnight Cash Rate unchanged at 3.50%. In the rate statement, the central bank noted that, “New Zealand’s economic growth is running at an annual rate of around 3½ percent. While dairy prices have declined sharply, domestic demand has retained momentum, supported by the ongoing growth in consumption and construction activity. Interest rates are low by historical standards and continue to support domestic demand. The exchange rate does not reflect the decline in export prices this year and remains unjustifiably and unsustainably high. We expect to see a further significant depreciation.” The rate then made its weekly high of 0.7869 on Thursday after RBNZ Governor Wheeler stated that, “Modest inflation pressures suggest the expansion can be sustained for longer than previously expected with a more gradual increase in interest rates”. The pair then declined on Friday as traders squared positions. NZD/USD went on to close at 0.7774, with an overall gain of +0.8% for the week. 

The Week Ahead

USD: The U.S. economic calendar is busier than usual this coming week, featuring the FOMC’s Fed Funds Rate Decision on Wednesday. Monday starts the week’s highlights off with the Empire State Manufacturing Index (12.1), the Capacity Utilization Rate (79.4%), Industrial Production (0.8%), and the NAHB Housing Market Index (59).  Tuesday’s key events include Building Permits (1.06M), Housing Starts (1.04M), and the Flash Manufacturing PMI (56.1). Wednesday then features CPI (-0.1%), Core CPI (0.1%), the Current Account -(98B), Crude Oil Inventories (last 1.5M),  the FOMC Economic Projections, the FOMC Rate Statement, the Federal Funds Rate Decision (<0.25%) and the FOMC Press Conference. Thursday offers Weekly Initial Jobless Claims (297K) and the Philly Fed Manufacturing Index (26.3), while Friday offers nothing notable.

AUD: The Australian economic calendar is not very active this coming week, and only features New Motor Vehicle Sales (last -1.6%) and the Mid-Year Economic and Fiscal Outlook on Monday, and then a speech by RBA Assistant Governor Debelle and the RBA’s Monetary Policy Meeting Minutes on Tuesday. Resistance for AUD/USD is seen at 0.8375, 0.8479/84 and 0.8540/65, with support noted at 0.8307, 0.8213/23 and 0.8066/81.

NZD: The New Zealand economic calendar is rather quiet this coming week, just featuring the tentatively scheduled GDT Price Index (last -1.1%) and the Current Account (-5.32B) on Tuesday; GDP (0.7%) on Wednesday, and ANZ Business Confidence (last 31.5) on Friday. The chart for NZD/USD shows resistance at 0.7791/0.7820, 0.7859/78 and 0.7925/94. On the downside, technical support is expected at 0.7605/97 and 0.7500/85.

GBP: The UK economic calendar is very busy this coming week, featuring key jobs data on Wednesday. Monday starts the week’s highlights off with CBI Industrial Order Expectations (3), and Tuesday’s key events include the Bank Stress Test Results, the BOE Financial Stability Report, the FPC Statement, a speech by BOE Governor Carney, CPI (1.2%), PPI Input (-1.1%) and the RPI (2.2%). Wednesday then features the Average Earnings Index (1.3%), the Claimant Count Change (-19.8K), the MPC Official Bank Rate Votes (2-0-7), the MPC Asset Purchase Facility Votes (0-0-9), and the Unemployment Rate (5.9%). Thursday offers Retail Sales (0.3%), while Friday’s important data then concludes the week with Public Sector Net Borrowing (14.8B) and CBI Realized Sales (30 27). Resistance to the topside for GBP/USD shows at 1.5725/56 and 1.5825/1.5961, while support for the pair is expected at 1.5514/1.5613, 1.5458/99 and 1.5267.

EUR: The Eurozone economic calendar is quite active this coming week, featuring PMI data on Monday and Tuesday. Monday starts the week’s highlights off with the German Buba Monthly Report, and Tuesday’s key events include French Flash Manufacturing PMI (48.7), French Flash Services PMI (48.6), German Flash Manufacturing PMI (50.4), German Flash Services PMI (52.6), EZ Flash Manufacturing PMI (50.5), EZ Flash Services PMI (51.6), the German ZEW Economic Sentiment survey (19.8), and the EZ ZEW Economic Sentiment survey (20.1). Wednesday then features EZ Final CPI (0.3%), while Thursday offers the German Ifo Business Climate survey (105.6), and the first day of the EU Economic Summit. Friday’s important data then concludes the week with the GfK German Consumer Climate survey (8.9) and the conclusion of the EU Economic Summit. Resistance for EUR/USD is seen at 1.2455/1.2500 and 1.2531/1.2613, with support showing at 1.2357/98, 1.2241/70 and 1.2133/62.

JPY: The Japanese economic calendar is busier than usual this coming week, featuring the Lower Parliamentary House Elections, the Tankan Manufacturing Index (13) and the Tankan Non-Manufacturing Index (14) that start the week on Sunday. Monday is then quiet, while Tuesday’s highlights include the Trade Balance (-0.99T). Wednesday and Thursday are quiet, and Friday’s important data then concludes the week with the tentatively scheduled BOJ Monetary Policy Statement and BOJ Press Conference. Resistance for USD/JPY currently shows up at 118.57/97, 121.38 and 121.84, with support indicated at 117.85/94, 117.23/43 and 116.82.

CAD: The Canadian economic calendar is moderately active this coming week, featuring CPI data on Friday. Monday is quiet, so Tuesday starts the week’s highlights off with Manufacturing Sales (-0.4%) and Foreign Securities Purchases (5.21B).  Wednesday’s key events then include Wholesale Sales (0.9%), while Thursday features nothing notable. Friday’s important data then concludes the week with Core CPI (0.1%), Core Retail Sales (0.2%), CPI (-0.2%), and Retail Sales (-0.4%). Resistance for USD/CAD is seen at 1.1590 and 1.1723, while support shows at 1.1447/75, 1.1368/1.1400 and 1.1295/1.1331.