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Weekly Market Watch - Monday, 15 March 2010
Subscribe to our weekly "Market Watch" newsletter. Last Week RecapEUR/USD rose considerably last week on positive numbers out from the Eurozone, trading off of its weekly low of 1.3536 on Tuesday as French Trade Balance numbers showed a better-than-expected deficit of €3.68B versus a consensus of €3.8B. On Wednesday, German trade numbers showed the Trade Deficit had shrunk to €8.0B, with imports rising 6% and exports declining by 6.3% to bring the German Trade Deficit to its lowest point in ten years. The rate continued improving, as U.S. Jobless Claims out on Thursday at 462K was slightly worse than the market’s consensus of 456K. Also, the U.S. Trade Balance showed a deficit of $37.3B, versus the $40.9B expected. The rate continued its rally to make its weekly high of 1.3795 on Friday, despite encouraging U.S. Retail Sales numbers which showed that Core Retail Sales expanded by 0.8% versus a consensus of 0.1%. Also on Friday, ECB President Trichet stated at Stanford University in California that, "A delayed exit from extraordinary liquidity support would distort market behaviour and misallocate credit." He said this in reference to the lessons learned from the economic crisis, and went on to add that, "We do not wish to breed dependency." EUR/USD then sold off on profit-taking to close the week at 1.3766, up 1% from the previous weekly close.USD/JPY traded lower at the beginning of last week to make its weekly low of 89.61 on Tuesday, as Japanese Leading Indicators showed a 97.1% level versus the 96.9% expected. The rate then began a sharp move higher as risk appetite returned to the markets amid reports out on Wednesday from China that trade exports had risen 45.7% in February, and imports had also risen 44.7%, both higher than expected. Also on Wednesday, a Reuters report hinted that inside sources say the BOJ is leaning toward easing monetary policy next week. The rate continued improving as BOJ Governor Shirakawa made comments to the effect that he believed easing monetary policy could eventually affect the Yen rate but that there was no clear relationship between short-term prices and foreign exchange rates. The pair continued rallying, making a high of 91.07 on Friday before backing off on position-squaring to close the week at 90.53, up just 0.3% from the end of the previous week. GBP/USD began last week by trading lower initially as it made its weekly low of 1.4871 on Wednesday after U.K. Trade Balance numbers out on Tuesday showed a deficit of £8.0B versus a consensus of a £6.9B deficit. The rate then recovered the rest of the week after statements from U.K. Prime Minister Brown made on Wednesday in London announced that the U.K. government’s budget would be published in two weeks on March 24th, thereby setting the stage for the national election widely rumoured for May 6th. In his speech, Brown stated: "We dare not risk the recovery… for our task above all else is to preserve and expand the jobs, and lift the standards of life of the British people. We are weathering the storm, now is no time to turn back." GBP/USD then made its weekly high of 1.5216 on Friday, before backing off to close at 1.5202, ending the week just 0.5% higher. AUD/USD started off on a soft note last week, with the rate hitting its weekly low of 0.9054 on Tuesday as Australian Home Loans showed a steep decline of 7.9% on the month, versus a consensus of a 2.1% increase. In addition, the previous 5.1% decline for the number was revised upwards from a 5.5% fall. AUD/USD then began heading upwards on Wednesday as the Australian Unemployment Rate came out unchanged at 5.3%, as was widely expected, but oil and gold prices gained. The rate continued higher, making its weekly high of 0.9192 on Friday before selling off to close at 0.9150, up 0.8% on the week. The USD/CAD rate was more volatile than usual last week. Canadian Housing Starts came out on Monday and showed an increase of 197K versus a consensus of 188K. USD/CAD then climbed to make its weekly high of 1.0320 on Thursday, although it subsequently sold off after Canada’s Trade Balance showed a $0.8B expansion versus a consensus of $0.3B. Also, a slightly better-than-expected Canadian Capacity Utilization Rate of 70.9% came out versus a 70.0% consensus. Nevertheless, the rate continued dropping, eventually making its weekly low of 1.0153 before position-squaring brought the rate back up to close at 1.0188, showing a 1% drop on the week overall. NZD/USD traded in a narrow range last week, trading off of its weekly low of 0.6930 seen on Monday. The rate gained further strength on Tuesday as the N.Z. Overseas Trade Index showed a 5.7% gain Q/Q, considerably higher than the consensus of 1.2%. The rate then made its weekly high of 0.7096 on Wednesday as the RBNZ left its Official Cash Rate unchanged at 2.5%, as was widely-expected. The pair then dropped on Thursday as New Zealand Retail Sales showed a month-on-month increase of 0.8%, versus the 0.4% expected. Nevertheless, the previous month’s number was revised downwards from 0.0% to a drop of 0.4%, effectively nullifying the headline number’s improvement. The rate went on to close at 0.7010 on Friday, showing a total gain of 0.6% for the week. The Week AheadUSD: The U.S. economic calendar is quite busy next week, and Daylight Savings Time begins on Sunday in the United States. Monday has the Empire State Manufacturing Index (21.9), TIC Long-term Purchases (50.3B), Capacity Utilization (72.7%) and Industrial Production (0.1%M/M) due out. Tuesday then looks like the weekly highlight with Building Permits (0.61M), Housing Starts (0.57M), Import Prices (-0.1%M/M), plus the Fed’s key policy announcement starting with the FOMC Statement. The benchmark Fed Funds rate is not expected to increase from its current 0.25% level. Wednesday features the OPEC meetings, PPI (0.2% and 0.1% Cored M/M) and Crude Oil Inventories (last 1.4M). Thursday begins with a speech by FOMC Member Duke in Washington, D.C., followed by CPI (0.1% and 0.1% Core M/M), Current Account (-120B), a speech by FOMC Member Hoenig in Washington, D.C., the Philly Fed Manufacturing Index (17.2). Friday is quiet, but Fed Chair Bernanke is scheduled to speak in Kissimmee on Saturday.AUD: The upcoming Australian economic calendar is fairly light this week. Things start on Monday with a speech by RBA Assistant Governor Edey in Sydney. Tuesday has the key RBA Monetary Policy Meeting Minutes that may shed some light on the recent rate rise and future prospects. Look for the MI Leading Index (last 0.5%M/M), plus Housing Starts (6.7%Q/Q) and the OPEC meetings on Wednesday. Thursday just has a speech by RBA Assistant Governor Debelle scheduled in Melbourne to close out the week since Friday is quiet. In terms of its technicals, AUD/USD showed some encouraging strength last week, trading as high as 0.9193, and indicating good signs of resuming its upwards trend. Also, the rate is staying comfortably above its 200-day MA, which currently comes in at 0.8714 and is still rising, thereby signifying the medium-term outlook remains bullish. Support now comes from a short-term upwards-slanting trend line now drawn at 0.8972. Also, the 14-day RSI is still in neutral territory at 62, so the upside appears more likely to predominate over the coming week as this rally plays out that may ultimately lead AUD/USD back to test its previous high Jan 14th at 0.9328. Resistance for AUD/USD shows on the chart at 0.9191, 0.9321/28 and 0.9405, while support is indicated at 0.9054, 0.8785/99 and 0.8709. To view live charts follow these links: AUD/USDNZD: The coming week of economic data releases is very quiet gets busier in New Zealand, with nothing due out until the OPEC Meetings on Wednesday. Thursday has the Westpac Consumer Sentiment index (last 116.9) due out, while Friday has Visitor Arrivals (last -2.4%M/M) and Credit Card Spending (last 2.6%Y/Y) to end the week. From a technical perspective, NZD/USD continued improving somewhat last week, trading just below its key psychological level at 0.7000 to a 0.7096 high just under the 0.7118 1:1 projection level of the move from 0.6806 to 0.7078 projected off the 0.6846 low. The 1:1.618 projection level comes in at 0.7286. The rate managed to close the week at 0.7011, just above its still-rising 200-day MA now at 0.6968. This MA is of interest since a weekly close below it could provoke longer-term selling in NZD/USD, and would reverse the medium-term outlook from bullish to bearish. Also, NZD/USD now trades in neutral territory on the 14-day RSI at 50, leaving little to suggest in terms of direction as the rate looks bounded by mildly rising trend lines currently drawn at 0.6858 and 0.7108. Nevertheless, a potential head and shoulders top formation seen on the hourly charts with a neckline at 0.6963 and a peak at 0.7096 might be of interest. Support for NZD/USD is seen at 0.6960/62, 0.6846/86 and 0.6806/16, while resistance to the topside shows in the 0.7048/96 region, at 0.7149 and in the 0.7291/7317 region. To view live charts follow these links: NZD/USDGBP: The upcoming economic data week looks fairly important for the United Kingdom. Also, rumours of a near-term election date announcement persist centred around Thursday, May 6th due to the scheduled budget date of March 24th permitting both national and local polls. The U.K. calendar starts early on Sunday with the Rightmove HPI (last 3.2%M/M) and the BOE’s Quarterly Bulletin. Monday is quiet, but Tuesday has the DCLG HPI (3.6%Y/Y), the CB Leading Index (last 0.4%M/M) and a speech by MPC Member Bean in London. Wednesday looks like the weekly highlight with the OPEC Meetings, the key U.K. Employment report including the Claimant Count Change (8.4K) and Unemployment Rate (7.8%), plus the MPC Meeting Minutes (0-0-9) and Average Earning Index (1.7%3m/Y) all scheduled. Thursday has Public Sector Net Borrowing (14.6B), Preliminary M4 Money Supply (0.8%M/M), CBI Industrial Order Expectations (-33), and a speech by MPC Member Sentence in London. A speech by MPC member Tucker in Brussels is the only item scheduled on Friday. On the technical side, GBP/USD held its recent low at 1.4782 last week, trading as high as 1.5216. The rate continues to correct higher above the 61.8% retracement level of the upwards move from 1.3502 to 1.7041 at 1.4854. Nevertheless, GBP/USD remains firmly below its 200-day MA, which is currently at 1.6215 and sloping downwards, so the medium-term bearish outlook remains intact for GBP/USD. Also, the rate’s 14-day RSI is at 35 and has now recovered from oversold territory. Overall, while some further upside corrective activity appears probable in the near term, the declining trend line drawn at 1.5263 would likely present a selling opportunity. Resistance for GBP/USD shows at 1.5216/65, 1.5322 and 1.5574, while support is indicated at 1.5122, 1.5025, 1.4934/45 and 1.4871, in addition to the key psychological 1.5000 level. To view live charts follow these links: GBP/USDEUR: The coming economic data week is moderately active in the Eurozone too. Monday offers the EZ Employment Change (last -0.5%Q/), whiel Tuesday has French CPI (0.4%M/M), the important German and Eurozone ZEW Economic Sentiment index (43.5 and 40.1) and EZ CPI (0.9% 0.8% Core Y/Y). Wednesday just has a speech by Buba President Weber scheduled in Bonn plus the OPEC Meetings, while Thursday has the EZ Current Account (2.9B) and the Italian and EZ Trade Balances (-0.19B and 5.1B). Look for German PPI (0.1%M/M) and a speech by ECB President Trichet in Brussels on Friday. On the technical front, the expected correction to EUR/USD’s recent slide has begun to materialize, going as high as 1.3796 and leaving the recent Mar 2nd low at 1.3437 as the level to shoot for if another downside move begins. The declining trend line now at 1.3718 has also been exceeded, and while this may be temporary, momentum oscillators do continue to confirm the upward correction. Nevertheless, the outlook for the medium-term remains bearish as EUR/USD trades well under its downward-sloping 200-day MA now at 1.4326, and while its 14-day RSI is now firmly in neutral territory at 48, the rate is trading outside of its upper Bollinger band at 1.3752, suggesting some initial downside may be warranted earlier in the week. Support for EUR/USD shows at 1.3727, 1.3530/44 and 1.3437/60, while resistance to the topside can be found in the 1.3773 to 1.3839 congestion region, at 1.4026 and at 1.4194. To view live charts follow these links: EUR/USDJPY: A considerably more important economic data schedule is expected in Japan next week. Monday just offers Household Confidence (40.6), and Tuesday is quiet, but Wednesday looks like the weekly highlight with Tertiary Industry Activity (1.3%M/M), the OPEC meetings and the tentatively-scheduled key Monetary Policy Statement in which the BOJ is widely expected to leave its benchmark Overnight Call Rate unchanged at 0.10%, although rumours of another ease in BOJ Policy spread last week. A BOJ Press Conference should follow. Thursday has the BSI Manufacturing Index (15.3) and the BOJ’s Monthly Report, while Friday closes the week with the METI’s All Industries Activity (1.6%M/M) release. With respect to the technical picture, USD/JPY held onto its gains of the previous week and traded as high as 91.07, but the rate has still kept below its key downwards-slanting trend line now drawn at 91.32. It also failed to break above its 200-day MA which is still declining and now comes in at 91.90, so the upside looks challenging for the coming week, although a confirmed break of that region would probably send USD/JPY considerably higher. Also, USD/JPY’s 14-day RSI is in neutral territory at 53.6 and the rate is trading near the centre of its Bollinger bands, so some directional guidance is required which would come on a break of either the 88.12 or 92.14 recent reversal points. Resistance for USD/JPY shows at 91.07/37, in the 92.03/14 region and 93.77, while support is indicated at 90.16, 89.47/62, 88.73/81 and 88.12. To view live charts follow these links: JPY/USDCAD: The Canadian economic data week coming up has some interesting releases due out, beginning with a clock shift to Daylights Savings Time on Sunday. Monday has New Motor Vehicle Sales (0%M/M), while Tuesday offers Labor Productivity (0.7%Q/Q) and Manufacturing Sales (0.7%M/M). Wednesday has the OPEC Meetings, plus Wholesale Sales (0.6%M/M), while Thursday has Foreign Security Purchases (7.53B). Friday looks like the weekly highlight with CPI (0.4% and 0.3% Core M/M) and Retail Sales (0.6% and 0.5% Core M/M) to close out the week. Technically, USD/CAD’s continued fall last week took it to a new low at 1.0153 on Mar 12th. This appears to have broken, or at least extended to this new level, the lower part of the trading range for USD/CAD. Furthermore, USD/CAD’s 14-day RSI is heading toward oversold territory now at 34 and falling. The rate is also trading near its lower daily Bollinger Band now at 1.0153. This indicates that a bounce from current levels may be forthcoming to send USD/CAD back into its trading range, now delimited by 1.0153 to 1.0779, with 1.0466 now being the pivot. Nevertheless, since USD/CAD is trading well below its downward-sloping 200-day MA currently at 1.0747 and the momentum oscillator continues to confirm the downward move, the outlook remains bearish in the medium-term, so selling USD/CAD on rallies would be indicated from that perspective. Resistance in USD/CAD comes in at 1.0290/1.0320, 1.0357/68 and 1.0441, while support shows at 1.0153, in the 0.9973/90 region, and at the key psychological 1.0000 level. To view live charts follow these links: CAD/USD CAD/EUR CAD/GBP CAD/JPY CAD/NZD
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