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Weekly Market Watch - Monday, 26 July 2010
Subscribe to our weekly "Market Watch" newsletter. Last Week RecapEUR: EUR/USD started last week on a positive note, trading higher on Monday despite the Eurozone Current Account showing a deficit of -5.8B, considerably more than the -3.0B deficit expected. The rate rose even after Moody’s downgraded Ireland’s sovereign debt to Aa2 from Aa1. Also, the E.U. and the IMF suspended talks with Hungary making it imperative that the Hungarians cut their budget deficit before accessing further bailout funds. On Tuesday, the pair made its weekly high of 1.3028 after German PPI increased 0.6% month on month, versus an expected increase of 0.2%. Also on Tuesday, U.S. Housing Starts came out at the lowest level seen since October at 0.55M versus the 0.58M expected, while U.S. Building Permits came out in line with expectations at 0.59M. Nevertheless, the rate was unable to sustain gains above the 1.3000 level and promptly declined after disappointing results from a debt auction of three month bills in Hungary. The rate continued heading south on Wednesday, making its weekly low of 1.2732 as another European debt auction — this time in Portugal — failed to meet expectations. EUR/USD then reversed and started rallying on Wednesday after Ben Bernanke, Chairman of the U.S. Federal Reserve, stated in Congressional testimony that, “Even as the Federal Reserve continues prudent planning for the ultimate withdrawal of monetary policy accommodation, we also recognize that the economic outlook remains unusually uncertain.” The “unusually uncertain” comment sent U.S. equity markets down one percent immediately afterwards. The Greenback continued declining on Thursday as Eurozone economic releases gave positive indications for the European economy. The releases included German, French and Eurozone Services and Manufacturing PMI, which all showed better than expected results, while Eurozone Industrial New Orders rose by 3.8%, considerably better than the decline of -0.1% expected. Also on Thursday, U.S. Existing Home Sales increased to 5.37M versus the 5.18M expected. Nevertheless, U.S. Initial Jobless Claims came out higher than expected at 464K versus the 449K anticipated. On Friday, the rate continued higher as German Ifo Business Climate came out at 106.2, considerably higher than the 101.5 expected. The upside for the Euro was limited despite the results of the stress tests for 91 European banks conducted by the Committee of European Banking Supervisors or CEBS being better than expected. The results of the “stress tests” indicated that only seven banks failed – five in Spain, one in Germany and one in Greece. The market’s consensus was for up to 20 percent of the banks to fail, and this divergence led some observers to question whether perhaps the tests may not have been rigorous enough. EUR/USD finished the week by closing on Friday at 1.2914, down -0.1%.JPY: USD/JPY traded higher last week despite a lack of important economic releases out of Japan, other than the BOJ’s Monetary Policy Meeting Minutes. The pair began the week on a positive note, making its weekly high of 87.56 on Tuesday despite disappointing U.S. Housing Starts. The rate then headed south after the Tuesday release of the BOJ’s Monetary Policy Meeting Minutes which reiterated the position of the central bank in keeping its benchmark rates low at 0.1%. In addition, the minutes indicated some improvement in the Japanese economy by noting that, “Japan''s economy shows further signs of a moderate recovery, induced by improvement in overseas economic conditions. Exports and production have been increasing mainly against a backdrop of high growth in emerging economies. In these circumstances, business fixed investment is showing signs of picking up.” On Thursday, the pair made its weekly low of 86.33 on the back of news that the Japanese All Industries Activity had increased by 0.2% month on month, versus an expected decline of -0.4%. The rate then rallied on Friday as U.S. HPI and Existing Home Sales came out with better than expected results. The pair went on to close the week at 87.35, showing an overall gain of 0.8%. GBP: GBP/USD started last week off on a soft note Monday, with the U.K. Rightmove HPI declining by -0.6% versus an unrevised increase of +0.3% seen for the previous reading. The rate then began firming on Tuesday, despite U.K. CBI Industrial Order Expectations printing at -16, considerably better than the -24 expected. Also, U.K. Public Sector Borrowing expanded to 14.5B versus a consensus of 13.2B, with the previous number revised upward to 17.1B from 16B, while Preliminary Mortgage Approvals declined to 48K versus a consensus of 52K. Cable then made its weekly low of 1.5123 on Wednesday after the BOE released their June Monetary Policy Committee Meeting Minutes. In the minutes, the BOE revealed that MPC member Andrew Sentance had repeated his dissenting vote against raising rates in July for the second consecutive month. Adding to Cable’s decline was MPC member Posen comments that, "more than 50% likelihood in my estimation the right next move will be to loosen rather than to tighten". Cable began trading higher on Thursday as U.K. Retail Sales showed a 0.7% increase month on month versus an increase of 0.5% expected with the previous number revised upward to 0.8%from 0.6%. On Friday, the pair shot up on news that U.K. GDP had increased by 1.1% quarter on quarter, which was considerably better than the 0.6% expected. GBP/USD then made its weekly high of 1.5448 before selling off on profit taking to close the week at 1.5421, up 0.8%. AUD: AUD/USD gained considerably last week as the Aussie benefited from renewed risk appetite in the currency market. The rate began the week on a soft note by trading off of its weekly low of 0.8632 seen on Monday before rallying ahead of the RBA’s Monetary Policy Meeting Minutes for June that came out on Tuesday. The minutes noted that, “headline inflation is expected to rise” in Australia, and added that, “the important question for the board at the next meeting would be whether the new information materially changed the medium term outlook for inflation”. The statements fueled speculation that the RBA might be ready to hike rates again, possibly as soon as the next RBA Monetary Policy meeting on August 3rd. AUD/USD then lost some ground on Wednesday despite a report that the Westpac Bank-Melbourne Institute Leading Index of economic activity had risen 0.2% in May, an improvement from the previous flat reading. The rate then continued rallying on Thursday after U.S. Dollar sold off on the “unusually uncertain” comments by U.S. Fed Chairman Ben Bernanke and despite a significant drop in the NAB Quarterly Business Confidence indicator which printed at 3 versus a much higher previous reading of 17, thereby indicating that Australia’s business sector is losing confidence. Despite that negative number, AUD/USD continued rallying into Friday as Australian Import Prices showed an increase of 1.9%, versus a consensus of only 1.0%. The pair made its weekly high of 0.8970 before closing at 0.8969, an impressive gain of 3.1% for the week. CAD: USD/CAD declined significantly last week, giving back all of the previous week’s gains in the process. The week began with the rate declining as Canadian Foreign Securities Purchases showed a whopping rise to 23.16B from 12.36B, considerably better than the expected 8.05B. The number indicates the increased interest of foreign investors in buying Canadian securities. The rate continued south on Tuesday as the BOC released its Rate Decision for July in which the BOC announced it was raising its benchmark Overnight Rate to 0.75% as was widely anticipated. The BOC also raised the Discount Rate by 25bps to 0.50% and the Bank Rate by 25bps to 1%. The central bank’s statement accompanying the rate hike announcement noted that there was "considerable uncertainty surrounding the outlook" and that any additional cuts to monetary stimulus “would have to be weighed carefully against domestic and global economic developments." USD/CAD rose somewhat on Wednesday after Canadian Wholesale Sales came out with a decline of -0.1%, considerably lower than the expected rise of 0.4%. On Thursday, the rate resumed its southward direction despite Canadian Core Retail Sales falling by -0.1% month on month versus a rise of 0.5% expected, and Retail Sales dropping by -0.2% month on month versus an expected rise of +0.5%. Also on Thursday, the BOC Monetary Policy Report revised the central bank’s Canadian GDP estimates for growth downward to 3.5% from 3.7% in 2010 and to 2.9% from 3.1% in 2011. On Friday, the rate continued declining, eventually making its weekly low of 1.0345 despite news that Canadian Core CPI dropped by -0.1% month on month, versus an expected increase of 0.1%, while CPI also declined by -0.1% versus an expected flat reading. USD/CAD then went on to close the week at 1.0358, down 1.8% overall. NZD: NZD/USD benefited considerably from the renewed risk appetite and firmer commodities prices last week, trading off of its weekly low of 0.7027 seen Monday after gapping lower on the open. NZD/USD then started rallying with no significant economic numbers being released in New Zealand. On Tuesday, the rate rallied sharply, although it then paused on Wednesday with New Zealand Credit Card Spending increasing by 4.5% year on year versus a previous reading of 3.4%. Also, New Zealand Visitor Arrivals increased by only 0.3% month on month versus a previous reading of 1.1% that was revised upward from 1.0%. On Thursday, NZD/USD shot up as the Greenback was pressured by U.S. Fed Chairman Bernanke’s testimony regarding the uncertain outlook for the U.S. economy. The pair then made its weekly high of 0.7288 on Friday before trading lower to close at 0.7269, up 2.2% on the week. The Week AheadUSD: The economic data week coming up in the United States calms down considerably compared with the previous week, but it still features important Advance GDP data due out on Friday. Monday starts the week off with just New Home Sales (317K), followed on Tuesday by the S&P/CS Composite-20 HPI (3.8% y/y), the important CB Consumer Confidence index (51.5) and the Richmond Manufacturing Index (20). On Wednesday, look for Core Durable Goods Orders (0.6% m/m), Durable Goods Orders (0.9% m/m), and the important Fed Beige Book. Thursday offers just Initial Jobless Claims (456K), while Friday ends the week on a very active note with the highlighted Advance GDP data (2.5% q/q), as well as the Advance GDP Price Index (1.1% q/q), the Employment Cost Index (0.5% q/q), Chicago PMI (56.1), Revised University of Michigan Consumer Sentiment survey (67.5) and Inflation Expectations (last 2.9%).AUD: The coming week of economic data for Australia is rather quiet, but has some significant releases due out, featuring the Australian CPI inflation data due out on Wednesday. Monday starts the week with the release of Australian PPI (1.5% q/q), while Tuesday offers the CB Leading Index (last 0.1% m/m). Wednesday has the highlighted Australian CPI (1.0% q/q) data scheduled for release, along with the Trimmed Mean CPI (0.8% q/q). Thursday is quiet, but on Friday look for Private Sector Credit (0.4% m/m) to end the week. Technically, AUD/USD rose initially last week to make yet another a new high within its recent corrective upwards trend at 0.8970. In doing so, it convincingly bested the 0.8870 high seen on July 14th, as well as the key 61.8% Fibonacci Retracement level at 0.8883 of the down move from 0.9388 to 0.8066. The chart for AUD/USD shows resistance at 0.9077, 0.9134 and in the 0.9323/0.9388 region. Support is indicated at 0.8895, 0.8737 and 0.8632. To view live charts follow these links: AUD/USDNZD: The coming week of economic data releases in New Zealand is against rather peaceful, but features the very important RBNZ Rate Decision on Thursday in which a rate hike is anticipated. Monday and Tuesday have nothing notable scheduled for release, so Wednesday starts the week out with NBNZ Business Confidence (last 40.2). Thursday offers the highlighted Official Cash Rate Announcement by the RBNZ in which the central bank is widely expected to hike its benchmark interest rate by 25 bps to 3.00%. Also due out is the associated RBNZ Rate Statement that should give some insight into the decision, as well as the New Zealand Trade Balance (369M). Friday ends the week with Building Consents (-9.6% m/m). Technically, despite gapping lower at last week’s open, NZD/USD filled the gap and recovered from its 0.7027 low seen early last week to trade as high as 0.7288, just under its previous recent 0.7302 high. Support for NZD/USD is now seen on the charts at 0.7225, 0.7095 and 0.7027, just ahead of the psychological 0.7000 level. Resistance shows up in the 0.7288/0.7324 region, at 0.7440 and at 0.7522. To view live charts follow these links: NZD/USDGBP: The week of upcoming economic data releases in the United Kingdom calms considerably, and features the Nationwide House Price Index (HPI) due out on Thursday. Monday starts the week off on a quiet note, with nothing significant scheduled for release. Tuesday has CBI Realized Sales (-3), while Wednesday has scheduled important testimony by BOE Governor King, along with MPC Members Andrew Sentence, Charles Bean, David Miles, and Paul Fisher, on the topics of financial stability and monetary policy before the Treasury Select Committee in London. On Thursday, look for the highlighted Nationwide HPI (-0.4% m/m) data, as well as Net Lending to Individuals (1.3B m/m), Final Mortgage Approvals (48K) and GfK Consumer Confidence (-21). This ends the week since Friday has nothing notable due out. Technically, GBP/USD consolidated above 1.5123 in the early part of last week before spiking sharply higher on Friday to a high of 1.5448, just shy of the previous week’s 1.5470 high. Resistance to the topside for GBP/USD shows in the 1.5448 to 1.5521 region (right around the psychological 1.5500 level), as well as in the 1.5574/ 1.5579 region and above that at 1.5764. Support is indicated at 1.5347, in the 1.5250/94 region and below that at 1.5123. To view live charts follow these links: GBP/USDEUR: The economic data week coming up in the Eurozone is somewhat less active than last, and features the Eurozone Employment Report due out on Friday. Monday starts the week out on a quiet note with nothing significant scheduled for release in the Eurozone. Tuesday has GfK German Consumer Climate (3.6), German Import Prices (0.4% m/m), M3 Money Supply (-0.1% y/y) and Private Loans (0.3% y/y). Wednesday offers German Preliminary CPI (0.3% m/m), while Thursday has the German Unemployment Change (-17K). Friday ends the week with some important data, including the highlighted Eurozone Unemployment Rate (10.0%), as well as German Retail Sales (0.0% m/m), CPI Flash Estimate (1.8% y/y), Italian Preliminary CPI (0.2% m/m) and the Italian Monthly Unemployment Rate (8.8%). Technically, EUR/USD traded correctively lower last week after making a new recent high at 1.3028 on Tuesday, bottoming out at 1.2732 before bouncing back to 1.2965. The rate traded sideways overall and now appears to be forming a symmetrical triangle on the short term charts. Support for EUR/USD shows at 1.2793, in the 1.2682/1.2732 region, and at 1.2522. Resistance to the topside is seen at 1.2965, 1.3007 and 1.3093. To view live charts follow these links: EUR/USDJPY: The coming week of economic data releases in Japan has considerably more to offer than the previous week, featuring the Japanese CPI inflation data and Employment Report that are both due out on Friday. Monday starts the week out with the release of the Japanese Trade Balance (0.54T), while Tuesday offers just the Corporate Services Price Index or CSPI (-0.9% y/y). Wednesday has nothing notable due out, while Thursday has the important Retail Sales data (3.3% y/y). Friday is especially busy in Japan, offering Manufacturing PMI (last 53.9), Household Spending (-0.7% y/y), Tokyo Core CPI (-1.2% y/y), National Core CPI (-1.0% y/y), the Japanese Unemployment Rate (5.2%), Preliminary Industrial Production (0.2% m/m) and Housing Starts (1.7% y/y). Technically, USD/JPY failed to make a new low last week beyond the 86.25 level seen the previous week, only trading as far down as 86.33 before bouncing correctively higher to close at 87.35. Resistance for USD/JPY shows in the 86.96/87.35 and 89.09/14 regions and at 90.18, just above the psychological 90.00 level. Support is indicated at 86.73, in the 86.25/33 region and at 84.80. To view live charts follow these links: JPY/USDCAD: The coming week of economic data due out in Canada calms down significantly, and features the Canadian GDP number due out on Friday. Monday, Tuesday and Wednesday have nothing notable due out, so Thursday starts the week out with the release of the Raw Materials Price Index or RMPI (1.1% m/m) and the Industrial Product Price Index or IPPI (0.6% m/m). Friday offers just the highlighted Canadian GDP release (0.1%) to end the week. Technically, USD/CAD traded lower overall last week, making first a lower high at 1.0584 before making a higher low at 1.0345 as the rate continues to show clear signs of consolidating within a large symmetrical triangle pattern. The chart for USD/CAD shows resistance at 1.0428, in the 1.0579/84 region and at 1.0604. Support for the rate shows up at 1.0345, in the 1.0275/1.0357 region and at 1.0179. To view live charts follow these links: CAD/USD CAD/EUR CAD/GBP CAD/JPY CAD/NZD Subscribe to RSS commentary feed
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