Last week recap
EUR/USD extended its previous week’s gains in a volatile week that saw a lack of direction on the part of the ECB as they held rates steady. Furthermore, the FOMC gave no indications of further stimulus or QEIII and the Non-Farm Payrolls number came out significantly better than expected. The week began with the rate trading lower after Spanish Flash GDP came out showing the Spanish economy contracted -0.4% q/q as widely expected, also, an auction of 10-year Italian bonds ended with a yield of 5.96%, versus 5.82% expected. The pair then reversed direction, trading higher on Tuesday as German Retail Sales declined -0.1% m/m, versus an expected increase of +0.6%, while EZ Unemployment rose to a record 11.2%. Tuesday’s US economic numbers had CB Consumer Confidence rise to 65.9, versus 61.5 expected. On Wednesday, the rate began sliding as the FOMC left its benchmark Fed Funds rate unchanged at less than 0.25% and gave no indications of a new stimulus program, the post announcement statement reiterated, “The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate.” The pair then dropped sharply after making both its weekly high of 1.2402 and its weekly low of 1.2133 on Thursday as the market reacted to the ECB rate decision in which the central bank left the benchmark Minimum Bid Rate unchanged at 0.75%. After the decision, ECB President Draghi stated that, “Exceptionally high risk premia are observed in government bond prices in several countries and financial fragmentation hinders the effective working of monetary policy. Risk premia that are related to fears of the reversibility of the euro are unacceptable, and they need to be addressed in a fundamental manner. The euro is irreversible.” The pair then rallied sharply on Friday as US Non-Farm Employment Change showed the U.S. economy added 163K jobs in July, significantly higher than the 101K that was expected. EUR/USD went on to close at 1.2384, with an overall gain of +0.5% from its previous weekly close.
USD/JPY continued treading water last week, showing very little change for the second week in a row. The pair began the week trading lower despite Japanese Preliminary Industrial Production declining -0.1% m/m, versus an expected increase of +1.6%. The rate continued marginally lower on Tuesday after Japanese Household Spending increased only +1.6% y/y, versus an expected rise of +3.0%. Also out Tuesday were Japanese Average Cash Earnings, which declined -0.6% y/y, versus an expected increase of +0.1%. On Wednesday the pair made its weekly low of 77.90 as the FOMC left rates unchanged. The rate then picked up after the United States reported a favourable ADP Non-Farm Payrolls number. Thursday saw the rate trade marginally lower after U.S. Factory Orders came in lower than expected. The pair then made its weekly high of 78.76 on Friday after a better than expected U.S. Non-Farm Payrolls number. The rate then sold off somewhat, bringing it to close at 78.46, three pips higher than its previous closed and virtually unchanged for the week.
GBP/USD lost ground last week as the UK reported weaker than expected economic numbers and the BOE left rates and the Asset Purchase Facility unchanged. The week began with the rate trading lower after making its weekly high of 1.5750 on Monday after UK Net Lending to Individuals increased only +0.3B, versus an expected increase of +0.8B and UK CBI Realized Sales came out at 11, versus an expected 17 print. The rate then dropped sharply on Wednesday as the FOMC left rate unchanged and UK Nationwide HPI declined -0.7% m/m, versus an expected decline of -0.1%, and UK Manufacturing PMI, printing at 45.4, versus an expected 48.6 release. On Thursday, Cable made its weekly low of 1.5490 as the rate traded in a wide range after the BOE left the benchmark Official Cash Rate unchanged at 0.50% and the Asset Purchase Facility at £375B. Cable then recovered significantly on Friday after a positive U.S. Non-Farm Payrolls number. Also out was UK Services PMI which came out at 51.0, versus 51.6 expected. GBP/USD went on to close at 1.5644, showing an overall loss of -0.6% from its previous weekly close.
AUD/USD continued rallying last week as Australia reported better than expected economic data and risk appetite increased in the forex market. The week began on a positive note as the rate rose after Australian Home Sales increased +2.8% m/m, versus a previous increase of +0.7%. The pair then consolidated on Tuesday after Australian Building Approvals declined by only -2.5%, significantly better than the -14.6% decline that was expected. Also out Tuesday was Australian Private Sector Credit, increasing by +0.3% m/m, versus an expected +0.4% rise. The rate then dropped on Wednesday after a positive U.S. ADP Non-Farm Payrolls number and despite Australian HPI increasing +0.5% q/q, versus an expected decline of -0.5%. On Thursday, the pair traded with volatility making both its weekly high of 1.0578, and its weekly low of 1.0435, ending the session unchanged from the previous day. Thursday’s economic data had Australian Retail Sales increase +1.0% m/m, versus +0.6% expected and the Australian Trade Balance, which showed a surplus of +0.1B, versus an expected deficit of -0.36B. The pair then rallied sharply on Friday after a better than expected U.S. Non-Farm Payrolls number bringing the pair to close at 1.0568, with an overall gain of +0.8% for the week.
USD/CAD traded in a narrow range last week, ending the week with very little change with only two significant economic releases out of Canada. The week began with the pair trading lower on Monday in the absence of any significant releases out of either country. On Tuesday, the pair gained ground after Canadian GDP rose by only +0.1% m/m, versus an expected increase of +0.2%, and the Canadian RMPI, which declined -4.0% m/m, significantly worse than the decline of -1.5% expected. Wednesday saw the rate continue higher as the United States reported a positive employment number and the FOMC left rates unchanged. The pair continued increasing on Thursday making its weekly high of 1.0083 after U.S. Initial Jobless Claims came out better than expected. The rate then sold off sharply on Friday, making its weekly low of -0.9978 despite a positive U.S. Non-Farm Payrolls number. USD/CAD went on to close at 1.0012, with an overall loss of -0.2% from its previous weekly close.
NZD/USD extended its previous week’s gains last week as the commodity currencies continued gaining favour in the currency market. The week began on a soft note with the rate falling marginally despite New Zealand Business Consents rising by +5.7% m/m, significantly higher than the previous decline of -7.2%. The pair consolidated at a slightly lower level on Tuesday after the NBNZ Business Confidence index came out at 15.1, versus a previous release of 12.6. On Wednesday, the rate made its weekly low of 0.8065 as the FOMC left rate unchanged and a positive ADP Non-Farm Payrolls number. The pair then rose on Thursday as the United States reported better than expected Initial Jobless Claims. The rate then made its weekly high of 0.8196 on Friday after a positive U.S. Non-Farm Payrolls number, bringing the rate to close at 0.8185, showing an increase of +0.6% for the week.
The week ahead
USD: The upcoming U.S. economic calendar is considerably quieter than last week, featuring Trade Balance data on Thursday. Monday starts the week’s highlights off with a speech by Fed Chairman Bernanke, who will speak again on Tuesday. Wednesday then features Preliminary Nonfarm Productivity (1.5%), Preliminary Unit Labor Costs (0.4%), Crude Oil Inventories (last -6.5M) and the 10-y U.S. Bond Auction (last average yield 1.46% with a 3.6 bid-to-cover ratio). Thursday offers the Trade Balance (-47.4B) and Weekly Initial Jobless Claims (371K). Friday’s important data then concludes the week with Import Prices (0.1%) and the Federal Budget Balance (-103.0B).
AUD: The upcoming Australian economic calendar is about as active as last week, featuring the RBA Rate Decision on Tuesday. Monday is an Australian Bank Holiday, although ANZ Job Advertisements (-1.2) is scheduled to start the week’s highlights off. Tuesday’s key events include the RBA Rate Decision with the Cash Rate expected to remain unchanged (3.50%) and the associated Rate Statement due out. Wednesday then features Home Loans (2.1%), while Thursday offers the Employment Change (10.3K) and Unemployment Rate (5.3%). Friday’s important RBA Monetary Policy Statement then concludes the week’s key events. Resistance for AUD/USD is seen at 1.0752/63, 1.0843/55 and 1.1079, with support noted at 1.0472, 1.0322 and 1.0175/1.0223.
NZD: The upcoming New Zealand economic calendar is about as quiet last week, featuring Employment data on Thursday. Monday is quiet, so Tuesday starts the week’s highlights off with the Labor Cost Index (0.6%). Wednesday then features little of note, while Thursday offers the Employment Change (0.4%) and Unemployment Rate (6.5%). That concludes the week’s important data, since Friday has little noteworthy data scheduled for release. The chart for NZD/USD shows resistance at 0.8235/0.8317, 0.8468 and 0.8840. On the downside, technical support is expected at 0.8013/86, 0.7919 and 0.7805/58.
GBP: The upcoming UK economic calendar is a bit less active than last week, featuring the BOE’s Inflation Report on Wednesday. Monday starts the week’s highlights off with the Halifax HPI (-0.5%), and Tuesday’s key events include the BRC Retail Sales Monitor (1.4%), Manufacturing Production (-3.9%) and the NIESR GDP Estimate (last -0.2%). Wednesday then features the BOE Inflation Report, while Thursday offers the Trade Balance (-8.5B). Friday’s important data then concludes the week with PPI Input (1.3%). Resistance to the topside for GBP/USD shows at 1.5767/77 and 1.5804/47, while support for the pair is expected at 1.5629, 1.5403/89 and 1.5392.
EUR: The upcoming Eurozone economic calendar is quieter than last week, featuring the ECB’s Monthly Bulletin on Thursday. Monday starts the week’s highlights off with the Sentix Investor Confidence survey (-30.8), and Tuesday’s key events include Italian Industrial Production (-1.0%), Italian Preliminary GDP (-0.7%) and German Factory Orders (-0.8%). Wednesday then features German Industrial Production (-0.7%) and the tentatively scheduled German 10-y Bond Auction (last average yield was 1.31 with a 1.5 bid-to-cover ratio), while Thursday offers the ECB Monthly Bulletin. Friday’s important data then concludes the week with French Industrial Production (0.4%). Resistance for EUR/USD is seen at 1.2407/42 and 1.2747, with support showing at 1.2259, 1.2134/62 and 1.2041.
JPY: The upcoming Japanese economic calendar is a bit busier than last week, featuring the BOJ’s Rate Decision on Thursday. Monday and Tuesday are quiet, so Wednesday starts the week’s highlights off with the Current Account (0.75T). Thursday then features Core Machinery Orders (11.3%), and the BOJ’s tentatively scheduled Monetary Policy Statement, Overnight Call Rate Decision (<0.10%) and Press Conference. That concludes the week’s important data since Friday offers little of note. Resistance for USD/JPY currently shows up at 78.59/99 and 79.04/80, with support indicated at 77.66/94 and 76.02.
CAD: The upcoming Canadian economic calendar is busier than last week, featuring Employment data on Friday. Monday is a Canadian Bank Holiday, so Tuesday starts the week’s highlights off with Building Permits (-3.5%) and the Ivey PMI (51.7). Wednesday is quiet, while Thursday offers Housing Starts (212K), the Trade Balance (-0.9B) and the NHPI (0.4%). Friday’s important data then concludes the week with the Employment Change (10.2K) and the Unemployment Rate (7.3%). Resistance for USD/CAD is seen at 1.0083, 1.0200/49 and 1.0299/1.0361, while support shows at 0.9979 and 0.9799.