AUD Weekly Market Watch 06/07/2015

Last Week recap

EUR/USD Extended its previous week’s losses last week after creditors failed to come to an agreement with Greece and the United States reported a weaker than expected Non-Farm Payrolls number. The week began with the rate gaining sharply after gapping lower on Monday, making both its weekly low of 1.0954 and its weekly high of 1.1277 after news that Greece would hold a referendum on bailout terms with creditors on July 5th. Also pressuring the pair was the ECB freezing further Emergency Liquidity Assistance to Greek banks. Monday’s economic numbers had German Preliminary CPI decline -0.1% m/m compared to an expected increase of +0.1%, while Spanish Flash CPI increased +0.1% y/y versus an expected decline of -0.1%. U.S. data had Pending Home Sales increase +0.9% m/m versus +1.3% anticipated. The rate continued selling off on Tuesday after Greece failed to make a payment of €1.54B which was due to the IMF that day. Eurogroup chair Jeroen Dijsselbloem, who sent Greece a last minute offer, said at the Eurogroup Meetings that, “I continue to say our door is open, although the options and the time are very limited. This is really about the future of Greece and also of the Eurozone, but mainly of Greece”. Tuesday’s economic data had U.S. CB Consumer Confidence print at 101.4 compared to an expected reading of 97.1, and German Retail Sales, which increased +0.5% m/m versus an expected flat reading. On Wednesday, the pair extended its losses after Greek PM Tsipras reportedly sent a letter to the ECB, the EC and the IMF stating that he was ready to accept many of the conditions offered the previous week. Nevertheless, Germany said it would not accept an agreement before the referendum. Also weighing on the rate was U.S. ADP Non-Farm Employment Change, which increased to +237K jobs compared to the +219K expected, and U.S. ISM Manufacturing PMI, which printed at 53.5 in line with expectations. The pair then gained ground on Thursday after U.S. Non-Farm Employment Change showed +223K new jobs in June, versus +231K expected, with the previous number downwardly revised from +280K to +254K, while the U.S. Unemployment Rate dropped to 5.3%, its lowest level in seven years. Also on Thursday were comments from ECB President Draghi, who stated that, “It is particularly important to emphasise the rule-based nature and legal side of this system when considering the greater risk of contagion which may accompany the development of the Capital Markets Union. The further integration of Europe’s financial sectors may enhance systemic risk across the continent, meaning that ultimately, a single regulatory supervisor and macroprudential toolkit for capital markets should be established.” Friday saw the rate gain a fraction in slow holiday trading after Eurozone Retail Sales increased +0.2% m/m versus +0.1% expected. EUR/USD went on to end the week at 1.1104, with an overall loss of -0.6% from its previous weekly close. As of this writing, the referendum in Greece is showing 61% of voters cast “no” votes, with half of the ballots counted thus far.

USD/JPY Reversed direction, losing ground last week as asset flows favoured the Yen over the Greenback and with mixed economic numbers from both countries. The week began with the pair gapping lower on Monday as Japanese Retail Sales increased +3.0% y/y versus an anticipated +2.1% rise. The rate continued lower on Tuesday, making its weekly low of 121.93 despite Japanese Average Cash Earnings increasing +0.6% y/y compared to +0.7% expected and a positive U.S. consumer confidence number. On Wednesday, the pair rebounded, trading higher after better than expected U.S. ADP Non-Farm Employment Change and ISM Manufacturing PMI numbers. Wednesday’s Japanese data had the Tankan Manufacturing Index print at 15 versus a reading of 12 expected, and the Tankan Non-Manufacturing Index, which showed a reading of 23, as was widely anticipated. The rate then made its weekly high of 123.72 on Thursday before selling off after a lower than expected U.S. NFP number. The pair continued lower on Friday in the absence of any significant data out of either country. USD/JPY went on to close at 122.81, showing a decline of -0.8% for the week. 

GBP/USD Extended its previous week’s losses last week as both countries reported mixed economic numbers while the Greek debt situation indirectly pressured Sterling. The week began with Cable making its weekly high of 1.5788 on Monday despite UK Net Lending to Individuals increasing +3.1B m/m compared to +3.3B expected. The rate then declined a fraction on Tuesday after the UK Current Account showed a deficit of -26.5B compared to an expected deficit of -23.7B, also, UK Final GDP increased +0.4% q/q as widely expected. On Wednesday, Cable fell sharply after UK Manufacturing PMI printed at 51.4 compared to 52.6 expected. Also pressuring Cable was the BOE’s Financial Stability Report, which warned that financial stability had deteriorated due to the situation with Greece, and that, “An erosion of trust and loss of social licence risk the imposition of rules or restrictions on banks and markets that are detrimental to their contribution to prosperity.” For his part, BOE Governor Carney said that, “The UK authorities will continue to monitor developments closely and will take actions required to safeguard financial stability in the United Kingdom. The situation remains fluid and it is possible that a deepening of the Greek crisis could prompt a broader reassessment of risk in financial markets”. In addition, he said that “exposures to Greece are very small relative to their capital bases. The footprint of Greek banks in the U.K. is tiny compared to the size of our economy.” Thursday saw the rate consolidate at a slightly lower level despite a lower than expected U.S. NFP number and UK Construction PMI, which printed at 58.1 compared to an expected reading of 56.6. Cable drifted lower on Friday despite UK Services PMI, which printed at 58.5 versus an anticipated reading of 57.4. GBP/USD ended the week at 1.5561, with an overall loss of -1.2%.

AUD/USD Extended its previous week’s losses last week as asset flows favoured the Greenback over the Aussie with both countries reporting mixed economic data. The week began with the rate gaining on Monday after a lower than expected U.S. housing number. The pair continued higher on Tuesday after comments by RBA Governor Stevens, who said that, “In the wake of a financial crisis associated with over-leverage, monetary policy can, by lowering interest rates, lessen the burden on the indebted sectors by shifting the burden in part to the net holders of interest-earning assets. This will lessen the negative feedback from debt to spending, which, in turn, stops aggregate spending falling as much as it otherwise might do (even though the net asset holders will at some point start to reduce their spending if interest income continues to fall).” On Wednesday, the rate made its weekly high of 0.7737 after Australian Building Approvals increased +2.4% m/m, double the expected +1.2%, nevertheless, the previous release was significantly revised down from -4.4% to -5.2%. The rate then declined sharply after a positive U.S. employment number. Thursday saw the pair extend its losses after the Australian Trade Balance showed a deficit of -2.75B compared to an expected deficit of -2.21B, with the previous number revised down to -4.14B from -3.89B. The rate then dropped sharply on Friday, making its weekly low of 0.7507 after Australian Retail Sales increased +0.3% m/m versus +0.5% anticipated. AUD/USD ended the week at 0.7513, with a loss of -1.9% from its previous weekly close. 

USD/CAD Continued gaining last week as the United States reported mixed economic numbers with very little economic data out of Canada. The rate started the week on a positive note, gaining after making its weekly low of 1.2303 on Monday after Canadian RMPI increased +4.4% m/m as widely anticipated. Tuesday saw the rate continue higher after Canadian GDP declined -0.1% m/m versus an expected increase of +0.1%. On Wednesday, the pair continued rallying after positive U.S. employment and manufacturing data. The pair then made its weekly high of 1.2632 on Thursday before declining after a lower than expected U.S. NFP number. The rate gained ground on Friday in the absence of any data out of either country. USD/CAD closed at 1.2567, with an overall gain of +2.0% for the week.

NZD/USD Continued selling off last week as asset flows favoured the Greenback over the Kiwi with mixed numbers out of both economies. The week began with the rate making its weekly high of 0.6880 on Monday after New Zealand Building Consents showed a flat reading compared to a previous decline of -0.9% upwardly revised from -1.7%. The pair then declined on Tuesday after New Zealand ANZ Business Confidence printed at -2.3 versus a previous reading of +15.7. The pair continued selling off on Wednesday after the New Zealand GDT Price Index declined -5.9% versus a previous reading of -1.3%. The rate then made its weekly low of 0.6652 on Thursday despite a lower than expected U.S. Non-Farm Payrolls number. Friday saw the pair continue lower, bringing NZD/USD to close at 0.6680, with a weekly decline of -2.3%.

The Week Ahead

USD: The U.S. economic calendar is moderately active this coming week, featuring the FOMC Meeting Minutes on Wednesday.  Monday starts the week’s highlights off with ISM Non-Manufacturing PMI (56.5), and Tuesday’s key events include the Trade Balance (-42.8B) and JOLTS Job Openings (5.30M). Wednesday then offers Crude Oil Inventories (2.4M), the FOMC Meeting Minutes, and a speech by FOMC Member Williams, while Thursday features Weekly Initial Jobless Claims (277K) and a speech by FOMC Member Brainard. The week’s important events conclude on Friday with a speech by Fed Chair Janet Yellen.

AUD: The Australian economic calendar is fairly busy this coming week, featuring the RBA’s Cash Rate Decision on Tuesday.  Monday starts the week’s highlights off with ANZ Job Advertisements (0.0%), and Tuesday’s key events include the RBA’s Cash Rate Decision (unchanged at 2.00%) and the RBA Rate Statement. Wednesday then offers little of note, while Thursday features the Employment Change (0.1K) and Unemployment Rate (6.1%). Friday’s important data then concludes the week with Home Loans (-2.8%). Resistance for AUD/USD is seen at 0.7737/92, 0.7642/82 and 0.7532/0.7603, with support noted at 0.7472, 0.7271 and 0.7016.

NZD: The New Zealand economic calendar is quiet this coming week, only featuring the NZIER Business Confidence survey (last 23) on Monday. The chart for NZD/USD shows resistance at 0.6922/41, 0.6805/77 and 0.6681.  On the downside, technical support is expected at 0.6639/44 and 0.6557/71.

GBP: The UK economic calendar is quite active this coming week, featuring the Annual Budget Release on Wednesday.  Monday is quiet, so Tuesday starts the week’s highlights off with the Halifax HPI (8th-9th), Manufacturing Production (0.2%) and the NIESR GDP Estimate (0.6%). Wednesday’s key events then include the Annual Budget Release, while Thursday features the BOE’s Official Bank Rate Decision (unchanged at 0.50%), the Asset Purchase Facility (375B) and the tentatively scheduled MPC Rate Statement. Friday’s important data then concludes the week with the Trade Balance (-9.7B). Resistance to the topside for GBP/USD shows at 1.5597, 1.5666/97 and 1.5766/69, while support for the pair is expected at 1.5315/51 and 1.5446/1.5530.

EUR: The Eurozone economic calendar is less active than normal this coming week, but it features the very important Greek Bailout Vote on Sunday that is presently expected to result in a “no” vote.  Monday’s highlights include German Factory Orders (0.0%), the EZ Retail PMI survey (51.4) and Sentix Investor Confidence (15.6), and Tuesday’s key events include German Industrial Production (0.1%). Wednesday then offers little of note, while Thursday features the German Trade Balance (20.6B). Friday’s important data then concludes the week with French Industrial Production (0.5%) and Italian Industrial Production (0.3%). Resistance for EUR/USD is seen at 1.1379/91, 1.1207/89 and 1.1035/1.1150, with support showing at 1.0954/69, 1.0818/99 and 1.0712.

JPY: The Japanese economic calendar is peaceful this coming week, only featuring the Current Account (1.38T) on Wednesday and Core Machinery Orders (-4.6%) on Thursday. Resistance for USD/JPY currently shows up at 124.14/45, 123.85 and 122.45/47, with support indicated at 121.93/122.02 and 120.47/84.

CAD: The Canadian economic calendar is busy this coming week, featuring key jobs data on Friday.  Monday starts the week’s highlights off with the Ivey PMI survey (56.2) and the BOC Business Outlook Survey, and Tuesday’s key events include the Trade Balance (-2.5B). Wednesday then offers Building Permits (11.6%), while Thursday features NHPI (0.2%). Friday’s important data then concludes the week with the Employment Change (-4.5K) and the Unemployment Rate (6.9%). Resistance for USD/CAD is seen at 1.2822/34, 1.2783 and 1.2632/65, while support shows at 1.2537/1.2562, 1.2387/1.2422 and 1.2304.