AUD Weekly Market Watch 07/07/2014

Last week recap

EUR/USD Reversed direction, trading lower last week as the ECB left rates unchanged and the United States reported a better than expected Non-Farm Payrolls number. The week began with the pair gaining on Monday despite the EZ CPI Flash Estimate increasing +0.5% y/y, versus +0.6% expected, while U.S. Pending Home Sales increased +6.1%, significantly higher than the +1.4% increase that was expected.  The rate then declined on Tuesday after making its weekly high of 1.3700 as U.S. ISM Manufacturing PMI showed a reading of 55.3, in line with expectations. Also out was German Unemployment Change, showing an increase of +9K, versus an expected decline of -9K, however, the EZ Unemployment Rate dropped to 11.6% from 11.7%. On Wednesday, the pair continued heading south after Spanish Unemployment Change dropped -122.7K, versus an expected decline of -147.3K, and U.S. ADP Non-Farm Employment Change, showing an increase of +281K, versus +207K expected. The pair continued selling off on Thursday after the ECB left its benchmark Minimum Bid Rate unchanged at 0.15%. In the press conference following the rate release, ECB President Mario Draghi stated that, “The reasons for today’s Governing Council decisions are the following. First of all, we saw our baseline scenario by and large confirmed. There is a continuation of a modest recovery. In the last quarter of last year we had an increase in GDP of 0.3%, after two consecutive quarters of positive growth. The news that has come out since the last monetary policy meeting is also, I would say, by and large on the positive side.” In addition, U.S. Non-Farm Payrolls, showed an increase of +288K, versus +214K that was expected, with the U.S. Unemployment Rate dropping to 6.1% from 6.3%. Other economic numbers out Thursday were the U.S. Trade Balance, showing a deficit of -44.4B, versus -45.1B expected, and U.S. ISM Non-Manufacturing PMI, with a reading of 56.0, versus 56.2 expected. The pair then made its weekly low on Friday after German Factory Orders declined -1.7% m/m, versus -0.8% expected. EUR/USD went on to close at 1.3594, with an overall loss of -0.4% from its previous weekly close.

USD/JPY Reversed direction, gaining ground last week as Japan reported lower than expected economic data and with better than expected employment numbers from the United States. The week began with the pair making its weekly low of 101.23 on Monday after Japanese Preliminary Industrial Production increased +0.5% m/m, versus +0.9% expected. The rate then increased on Tuesday after the Japanese Tankan Manufacturing Index showed a reading of 12, versus an expected reading of 16, also out was the Tankan Non-Manufacturing Index, showing a reading of 19 as was widely anticipated, and Japanese Average Cash Earnings, which increased +0.8% y/y, also as widely expected. Wednesday saw the rate continue higher after a positive U.S. ADP Non-Farm Employment Change number. The pair then made its weekly high of 102.26 on Thursday after better than expected U.S. Non-Farm Payrolls and ISM Non-Manufacturing PMI numbers. The rate then declined on Friday, bringing USD/JPY to close at 102.00, showing a gain of +0.6% for the week.  

GBP/USD Extended its previous week’s gains last week after the UK reported better than expected economic data. The week began with Cable gaining after making its weekly low of 1.7008 on Monday, as UK Net Lending to Individuals increased +2.7B m/m, versus +2.5B expected. The pair continued rallying on Tuesday after UK Manufacturing PMI printed at 57.5, versus an expected reading of 56.7. Cable extended its gains, making its weekly high of 1.7176 on Wednesday after UK Nationwide HPI increased +1.0% m/m, versus +0.6% expected, while UK Construction PMI showed a reading of 62.6, versus 59.7 expected. The rate then sold off on Thursday after UK Services PMI came out with a reading of 52.7, versus 58.1 expected, and the United States reported better than expected employment and ISM data. The pair then resumed its rally on Friday, bringing GBP/USD to close at 1.7156, with an overall weekly gain of +0.8%.

AUD/USD Lost ground last week as the RBA left rates unchanged and the United States reported better than expected employment data. The week began on a positive note, with the pair rising despite Australian HIA New Home Sales declining -4.3% m/m, versus a previous reading of +2.9%. The pair then made its weekly high of 0.9504 on Tuesday after the RBA left its benchmark Cash Rate unchanged at 2.5% as widely expected.  After the rate release, RBA Governor Stevens noted that, “The exchange rate remains high by historical standards, particularly given the declines in key commodity prices, and hence is offering less assistance than it might in achieving balanced growth in the economy.” The rate then sold off on Wednesday after the Australian Trade Balance came out with an expanding deficit of -1.91B, versus -0.16B expected, with the previous number downwardly revised from -0.12B to -0.78B. On Thursday, the pair dropped sharply, making its weekly low of 0.9327 after a better than expected U.S. Non-Farm Payrolls number and despite Australian Building Approvals increasing +9.9% m/m, versus +3.1% expected, nevertheless, Australian Retail Sales declined -0.5% m/m, versus an expected flat reading. The pair then recovered somewhat on Friday, bringing AUD/USD to close at 0.9362, with an overall loss of -0.7% for the week. 

USD/CAD Declined fractionally last week as asset flows favoured the Loonie over the Greenback and with mixed economic data out of Canada. The week began with the rate consolidating at a slightly higher level after Canadian GDP increased +0.1% m/m, versus +0.2% expected. The pair then declined on Tuesday after U.S. ISM Manufacturing PMI came in as expected. On Wednesday, the pair gained ground after a better than expected U.S. ADP Non-Farm Employment Change number. The rate then declined on Thursday, making its weekly low of 1.0619 as the Canadian Trade Balance showed a deficit of -0.2B, in line with expectations. The pair then recovered somewhat on Friday, bringing USD/CAD to close at 1.0648, with a loss of 9 pips and virtually unchanged on the week.

NZD/USD Reversed direction, trading lower last week as the United States reported better than expected employment data and with very little economic data out of New Zealand. The week began on a soft note, with the rate declining on Monday after New Zealand Building Consents declined -4.6% m/m, versus a previous reading of +1.9% upwardly revised from +1.5%. The pair then gained on Tuesday after U.S. ISM Manufacturing PMI came out in line with expectations. On Wednesday, the rate consolidated at a slightly higher level after a positive U.S. employment number. The pair then made its weekly low of 0.8716 on Thursday after a better than expected U.S. Non-Farm Payrolls number. The rate continued weak on Friday in the absence of any significant data, bringing it to close at 0.8733, showing a loss of -0.5% from its previous weekly close.  

The Week Ahead

USD: The upcoming U.S. economic calendar is quieter than last week, featuring the FOMC Meeting Minutes on Thursday.  Monday is quiet, so Tuesday starts the week’s highlights off with JOLTS Job Openings (4.53M) and a speech by FOMC Member Kocherlakota. Wednesday’s key events then include Crude Oil Inventories (last -3.2M), the FOMC Meeting Minutes, and the 10-year Bond Auction (last average yield 2.65%, with a 2.9 bid-to-cover ratio).  Thursday features Weekly Initial Jobless Claims (316K) to conclude the week’s important data since Friday is quiet.

AUD: The upcoming Australian economic calendar is about as active as last week, featuring key jobs data on Thursday.  Monday starts the week’s highlights off with ANZ Job Advertisements (last -5.6%), and Tuesday’s key events include the NAB Business Confidence survey (last 7).  Wednesday then features Westpac Consumer Sentiment (0.2%), while Thursday offers MI Inflation Expectations (last 4.0%), the Employment Change (12.3K), and the Unemployment Rate (5.9%). Friday’s important data then concludes the week with Home Loans (-0.4%). Resistance for AUD/USD is seen at 0.9386/0.9460, 0.9504 and 0.9757, with support noted at 0.9321/0.9353, 0.9200/53 and 0.9112/37.

NZD: The upcoming New Zealand economic calendar is as quiet as last week, only featuring the NZIER Business Confidence survey (last 52) on Tuesday and the Business NZ Manufacturing Index (last 52.7) on Thursday. The chart for NZD/USD shows resistance at 0.8777, 0.8792 and 0.8840.  On the downside, technical support is expected at 0.8726/34, 0.8640/0.8700 and 0.8536/0.8602.

GBP: The upcoming UK economic calendar is a bit more active than last week, featuring the BOE’s Official Bank Rate Decision on Thursday.  Monday is quiet, so Tuesday starts the week’s highlights off with the tentatively scheduled Halifax HPI (July 8th-9th, -0.3%), as well as Manufacturing Production (0.5%) and the NIESR GDP Estimate (last 0.9%).  Wednesday offers nothing notable, while Thursday’s key events then include the Trade Balance (-9.0B), the Asset Purchase Facility (unchanged at 375B), the Official Bank Rate Decision (unchanged at 0.50%) and the tentatively scheduled MPC Rate Statement.  That concludes the week’s important data since Friday offers nothing notable. Resistance to the topside for GBP/USD shows at 1.7178 and 1.7443, while support for the pair is expected at 1.7051/62, 1.6991/95 and 1.6902/51.

EUR: The upcoming Eurozone economic calendar is considerably quieter than last week, featuring the ECB’s Monthly Bulletin on Thursday.  Monday is quiet, so Tuesday starts the week’s highlights off with the German Trade Balance (15.7B). Wednesday is also quiet, while Thursday’s key events include French Industrial Production (0.5%) and the ECB Monthly Bulletin.  Friday’s important data then concludes the week with the tentatively scheduled Italian 10-year Bond Auction. Resistance for EUR/USD is seen at 1.3633/1.3700 and 1.3732/1.3854, with support showing at 1.3561/86 and 1.3476/1.3512.

JPY: The upcoming Japanese economic calendar is a bit quieter than last week, only featuring Current Account data (0.17T) on Tuesday and Core Machinery Orders (0.9%) and Tertiary Industry Activity (1.9%) on Thursday. Resistance for USD/JPY currently shows up at 102.12/102.36, 102.79/103.01 and 103.75/104.12, with support indicated at 101.59, 100.00/101.43 and 96.56.

CAD: The upcoming Canadian economic calendar is busier than last week, featuring key jobs data on Friday.  Monday starts the week’s highlights off with Building Permits (3.1%), the Ivey PMI (51.3) and the BOC Business Outlook Survey, and Tuesday offers nothing notable. Wednesday’s key events then include Housing Starts (191K), while Thursday features the NHPI (0.3%). Friday’s important data then concludes the week with the Employment Change (26.2K) and Unemployment Rate (7.0%). Resistance for USD/CAD is seen at 1.0679, 1.0736/50 and 1.0813/1.0959, while support shows at 1.0656, 1.0625 and 1.0559.

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