Weekly Market Watch

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Released Monday, 14 May 2012

Last week recap



EUR/USD extended its previous week’s losses as Greek elections failed to confirm a majority party in the Greek parliament, leading some to suggest that Greece leave the EU. The New Democracy party —pro-austerity measures — failed to win a majority of seats, while the Syriza — anti-austerity — party failed to form a coalition government. The week began on a strong note, with the rate rising after initially selling off in the wake of Socialist Francois Hollande winning the French presidential election and Greek parliamentary elections failing to yield a majority winner. Monday’s numbers had German Factory Orders increase by +2.2% m/m, versus an expected increase of only +0.5%. The pair made its weekly high of 1.3064 on Tuesday after German Industrial Production increased by +2.8% m/m, versus an expected +0.8% rise; the rate then sold off as uncertainty over Greece prevailed, ending the session lower. The rate continued sharply lower on Wednesday as Spain nationalized its fourth largest bank, Bankia and uncertainty over Greece continued. On Thursday, the pair consolidated at a slightly higher level as the U.S. Trade Deficit widened to -51.8B, versus -49.8B expected, also, U.S. Import Prices declined by -0.5% m/m, versus a decline of -0.1% expected. The pair then made its weekly low of 1.2904 on Friday as an attempt to form a coalition government in Greece failed. Economic numbers on Friday had U.S. PPI decline by -0.2% m/m, versus an expected flat number, while headline PPI came out at +0.2% as widely anticipated. Also out was the U.S. Preliminary University of Michigan’s Consumer Sentiment index, which improved to 77.8, versus 76.4 that was expected. EUR/USD went on to close the week at 1.2921, showing an overall loss of -1.3% from its previous weekly close.



USD/JPY gained marginally last week as risk aversion dominated the forex throughout most of the week. The pair began the week rising marginally as asset flows favoured the Greenback over the Yen and the BOJ’s Monetary Policy Meeting Minutes suggested the central bank might increase its stimulus measures. On Tuesday, the rate consolidated at a slightly lower level in the absence of any significant economic data out of either country. The pair then made its weekly low of 79.42 on Wednesday despite positive results from a U.S. 10-yr Bond Auction. The rate then traded higher on Thursday despite a widening U.S. Trade Deficit and the Japanese Current Account expanding to a +0.79T surplus, versus +0.65T expected. The pair then consolidated on Friday as U.S. PPI came in showing mixed results, bring the rate to close at 79.91, a gain of merely +8 pips and virtually unchanged on the week.



GBP/USD extended its previous week’s losses as the BOE left rates and the Asset Purchase Facility unchanged and risk assets were pressured from uncertainty in the Eurozone. The week began with Cable making its weekly high of 1.6195 on Monday, as France confirmed Socialist Hollande had won elections for the presidency over the weekend and in the absence of any significant economic releases from either the UK or U.S. On Tuesday, the pair headed south after the UK RICS House Price Balance declined by -19%, versus -10% that was expected. Wednesday saw the rate continue losing ground as the UK BRC Retail Sales Monitor declined by -3.3% y/y, versus a previous reading of +1.3%. Cable then reversed direction, trading higher on Thursday after the BOE left the benchmark Official Bank Rate unchanged at 0.50% and the Asset Purchase Facility at 325B, both as widely anticipated. Also supporting the rate was UK Manufacturing Production, which increased by +0.9% m/m, versus an expected increase of +0.5%. Cable then sold off sharply on Friday, making its weekly low of 1.6060 after UK Nationwide Consumer Confidence fell to 44 from a previous reading of 53, and UK PPI Input, which declined by -1.5% m/m, versus an expected decline of -0.9%. GBP/USD went on to close the week at 1.6072, showing an overall loss of -0.5%.



AUD/USD continued sliding last week as risk aversion favoured the Greenback and despite positive economic data out of Australia. The week began on a positive note, with the rate making its weekly high of 1.0219 on Monday after Australian Building Approvals increased by +7.4% m/m, versus an expected rise of +3.2%, and Australian Retail Sales, which rose by +0.9% m/m, versus +0.3% expected. The pair then began selling off on Tuesday after the Australian Trade Balance showed its deficit had widened to -1.59B, versus -1.38B that was expected. The rate then made its weekly low of 1.0017 on Wednesday as uncertainty in the Eurozone weighed heavily on risk assets. On Thursday, the rate reversed, trading higher after Australian Employment Change showed an increase of +15.5K, versus an expected decline of -4.8K, while the Australian Unemployment Rate dropped to 4.9% from 5.2%, with the analyst consensus expecting a rise to 5.3%. The pair then resumed its downward direction on Friday as continued uncertainty in the Eurozone weighed on the commodity currencies. AUD/USD went on to close at 1.0029, showing an overall loss of -2.5% from its previous weekly close



USD/CAD gained ground last week as the Loonie joined the other commodity currencies declining largely due to risk aversion, and despite better than expected economic numbers out of Canada. The week began on a soft note, with the rate dropping as Canada reported Building Permits had risen +4.7% m/m, significantly higher than the expected decline of -0.5%. The pair then rose on Tuesday despite Canadian Housing Starts increasing to +245K, versus +204K expected. The pair continued higher on Wednesday, making its weekly high of 1.0062 as the United States reported favourable results from a 10-year bond auction. The rate then consolidated at a slightly lower level on Thursday after the Canadian Trade Balance showed its surplus had contracted to +0.4B, versus +0.7B expected. On Friday, the pair fell marginally after Canadian Employment Change showed an increase of +58.2K, significantly higher than the +10.1K expected, while the Canadian Unemployment Rate rose to 7.3% from 7.2% as widely expected. USD/CAD went on to close at 1.0008, with an overall gain of +0.5% for the week.

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NZD/USD declined last week, along with the other commodity currencies the rate was affected by risk aversion in the market. The week began on a soft note, with the rate gapping lower on the opening and then trading higher. On Tuesday, the pair fell sharply after making its weekly high of 0.7971 as the RBNZ released its Financial Stability Report, where it stated that, “The Reserve Bank is continuing to strengthen regulation of the financial system, drawing on lessons learned from the financial crisis. For the banking system, the Reserve Bank has released consultation papers on its proposed implementation of the Basel III capital adequacy regime.” The pair continued selling off on Wednesday after the New Zealand REINZ HPI declined by -0.3% m/m, versus a previous reading of +1.9%. The rate then consolidated at a slightly higher level on Thursday as the United States reported an expanding trade deficit. The pair then made its weekly low of 0.7809 on Friday as risk assets all fell against the Greenback. NZD/USD went on to close at 0.7837 showing an overall loss of -1.5% from its previous weekly close

The week ahead

AUD The upcoming Australian economic calendar is a bit less active than last week, featuring the RBA’s Monetary Policy Meeting Minutes on Tuesday. Monday starts the week’s highlights off with Home Loans (-1.7%) and a speech by RBA Deputy Governor Lowe, and Tuesday’s key events include the Monetary Policy Meeting Minutes and New Motor Vehicle Sales (last 4.0%). Wednesday then features Westpac Consumer Sentiment (last -1.6%) and the Wage Price Index (0.9%), while Thursday offers MI Inflation Expectations (last 3.3%). Friday offers little data of note, and the G8 Meetings will commence on Saturday. Resistance for AUD/USD is seen at 1.01413, 1.0225/68 and 1.0474, with support noted at 0.9927, 0.9663 and 0.9386.

CAD The upcoming economic calendar is about as active as last week, featuring Core CPI on Friday. Monday and Tuesday are quiet, so Wednesday starts the week’s highlights off with Manufacturing Sales (0.5%). Thursday’s key events include Foreign Securities Purchases (9.34B) and Wholesale Sales (last 0.4%). The G8 Meetings will begin on Friday and conclude on Saturday. Resistance for USD/CAD is seen at 1.0018/78, 1.0319 and 1.0523, while support shows at 0.9954/97, 0.9800/88 and 0.9724.

EUR The upcoming Eurozone economic calendar is considerably busier than last week, featuring the German ZEW Economic Sentiment survey on Tuesday. Monday starts the week’s highlights off with Industrial Production (0.5%) and the tentatively scheduled Italian 10-y Bond Auction last (last average yield 5.84%, with a 1.5 bid to cover ratio), and Tuesday’s key events include French Preliminary GDP (0.0%), German Preliminary GDP (0.1%), French Preliminary Non-Farm Payrolls (-0.2%) , the German ZEW Economic Sentiment survey (19.2), EZ Flash GDP (-0.2%), the EZ ZEW Economic Sentiment survey (11.7) and the ECOFIN Meetings. Wednesday then features EZ CPI (2.6%), EZ Core CPI (1.5%) and a speech by ECB President Draghi. Friday’s important data then concludes the week with German PPI (0.4%) and the G8 Meetings that will run through Saturday. Resistance for EUR/USD is seen at 1.2974/94, 1.3003/32 and 1.3283, with support showing at 1.2874/1.2904, 1.2626 and 1.2588.

GBP The upcoming UK economic calendar is a bit busier than last week, featuring the Claimant Count Change on Wednesday. Monday is quiet, so Tuesday starts the week’s highlights off with the Trade Balance (-8.4B). Wednesday then features the Claimant Count Change (4.9K), the Unemployment Rate (8.3%), a speech by BOE Governor King and the BOE Inflation Report, while Thursday offers little of note. The G8 Meetings will commence on Friday and run through Saturday. Resistance to the topside for GBP/USD shows at 1.6182, 1.6301 and 1.6616, while support for the pair is expected at 1.5983/1.6062, 1.5769/1.5808 and 1.5601.

JPY The upcoming Japanese economic calendar is a bit busier than last week, featuring Preliminary GDP on Thursday. Monday and Tuesday are quiet, so Wednesday starts the week’s highlights off with Core Machinery Orders (-3.3%) and Tertiary Industry Activity (-0.3%). Thursday offers Preliminary GDP (0.9%), and the G8 Meetings will commence on Friday and run through Saturday. Resistance for USD/JPY currently shows up at 0.8061, 81.68/96 and 83.30/37, with support indicated at 79.43/64, 0.7827 and 76.55.

NZD The upcoming New Zealand economic calendar is a bit busier than last week, featuring Core Retail Sales (0.3%) and Retail Sales (-0.4%) data on Monday. Tuesday and Wednesday offer little of note, while Thursday’s highlights include PPI Input (0.0%). Friday offers little data of note, and the G8 Meetings will commence on Saturday. The chart for NZD/USD shows resistance at 0.8040/86, 0.8235/0.8317 and 0.8427/69. On the downside, technical support is expected at 0.7633, 0.7461/66 and 0.7370.

USD The upcoming U.S. economic calendar is more active than last week, featuring the FOMC Meeting Minutes on Thursday. Monday is quiet, so Tuesday starts the week’s highlights off with Core CPI (0.2%), CPI (0.1%), Core Retail Sales (0.3%), Retail Sales (0.2%), the Empire State Manufacturing Index (9.3), TIC Long-Term Purchases (19.4B) and Business Inventories (0.5%). Wednesday then features Building Permits (0.73M), Housing Starts (0.69M), the Capacity Utilization Rate (78.9%), Industrial Production (0.6%), Mortgage Delinquencies (7.58%), Crude Oil Inventories (last 3.7M), the FOMC Meeting Minutes and the tentatively scheduled Treasury Currency Report, while Thursday offers Weekly Initial Jobless Claims (370K) and the Philly Fed Manufacturing Index (10.6). Friday’s important events conclude the week with the G8 Meetings that will run through Saturday. These meetings will be held at Camp David, and they are typically attended by central bankers and finance ministers from the G7 nations plus Russia. Agenda items include the European debt crisis, and officials may speak to reporters during the event, as well as issuing a formal statement after the meetings finish.


Open the calendar

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