Weekly Currency Report (2016.07.11)

Weekly Currency Report – The highlight of the week was release of the US nonfarm payrolls data and the Federal Reserve monetary policy meeting minutes. Macroeconomic data revealed that US nonfarm payrolls surged in June, as economy posted the largest increase in jobs in eight months, pointing towards a strong rebound in the jobs market. On the other hand, unemployment rate advanced more-than-expected in the same month. Moreover, average hourly earnings rose at a slower pace on a monthly basis in June. Further, ADP indicated that private sector employment increased in June. Additionally, the number of people applying for the new unemployment benefits surprisingly fell last week, further indicating strength in the labor market.

In other economic news, ISM indicated that non-manufacturing index expanded more-than-expected in June, marking its highest reading since November. Moreover, consumer credit advanced more-than-expected in May. Separately, minutes of the US Fed’s June 14-15 meeting, international economic uncertainty and a surprisingly weaker US employment report for May convinced Fed officials to hold back on plans to raise interest rate.

The Euro ended the week higher against the USD. Separately, minutes of the ECB’s latest monetary policy meeting, ECB officials warned that UK’s decision to leave the EU could have significant negative repercussions on Eurozone growth. Moreover, policymakers also indicated that the central bank was ready to provide additional stimulus if inflation continued to miss the near 2.0% target. Further, investor confidence fell more-than-expected for July, mainly hit due to the Brexit decision. Further, the region’s retail sales picked up pace on a monthly basis in May.

Separately, in Germany, industrial production contracted more-than-expected in May, indicating slower growth in the economy. Moreover, factory orders were flat in May, against the market expectations of an advance. On the other hand, the final Markit services PMI was revised higher than market expectations in June.

The Pound ended the week in the red. The BoE announced in its financial stability report, warning that there will be a period of uncertainty and adjustment following the Brexit decision and Britain will take time to establish new relationships with the EU and the rest of the world. Moreover, the central bank has taken steps to release up to £150 billion worth of lending to British households and businesses as BoE relaxed regulatory requirements on the banking sector. Moreover, data indicated NIESR estimated that growth in UK’s economy gained momentum in the second quarter of 2016. Meanwhile, UK’s industrial output declined less-than-expected in May, ending a two-month boom in the sector, while manufacturing activity also dropped on a monthly basis in May, highlighting fears about the country’s economic outlook.

EURUSD

The EUR traded 0.76% lower against the USD last week, with the pair closing at 1.1051, after Macroeconomic data indicated that Eurozone’s Sentix investor confidence index eased in July, hitting an eighteenth month low. Meanwhile, the final reading for Markit services PMI was revised slightly higher in June. Further, retail sales advanced on a monthly basis in May. Moreover, the producer price index rebounded more-than-expected on a monthly basis in May. In more economic news, Germany’s final Markit services PMI was revised upwards in June. Meanwhile, industrial production dropped on a monthly basis in May, while trade surplus narrowed in the same month. Separately, factory orders remained flat on a monthly basis in May. During the previous week, the pair traded at a high of 1.1186 and a low of 1.1002. Immediate downside, the first support level is seen at 1.0973, followed by 1.0896, while on the upside, the first resistance level situated in 1.1157, followed by 1.1264. This week, investors would closely monitor Eurozone’s consumer price inflation and trade balance along with industrial production data for further cues. Additionally, Germany’s consumer price and wholesale price indices will attract a lot of market attention.

GBPUSD

Last week, the GBP traded 2.36% lower against the USD and closed at 1.2954. Macroeconomic data revealed NIESR estimated that UK’s GDP expanded 0.6% in the three months to June. Moreover, UK’s industrial production dropped on a monthly basis in May, while manufacturing production declined less than market expectations in the same period. Additionally, goods trade deficit widened less than market expectations in May. Further, the nation’s Markit services PMI expanded at a slower pace in June, while construction PMI dropped in the same month, entering the contraction territory. The pair traded at a high of 1.3341 and a low of 1.2798 during the previous week. Immediate downside, the first support level is seen at 1.2721, followed by 1.2488, while on the upside, the first resistance level situated in 1.3264, followed by 1.3574. Looking ahead, investors will closely watch Bank of England’s interest rate decision and asset purchase facility along with quarterly bulletin for further direction. Moreover, UK’s CB leading index, inflation report hearings and BRC retail sales monitor will generate market attention.

USDJPY

The USD declined against the JPY last week, closing 1.93% lower at 100.54. On the data front, Japan’s current account surplus narrowed for the first time in 22 months, amid strength in the Japanese yen continued to weigh on the trade position in the country. Moreover, trade surplus fell sharply in May. Meanwhile, the nation’s official reserves advanced in June. Additionally, the preliminary reading for the leading index steadied in May, while the coincident index fell more-than-expected in the same month. Separately, Bank of Japan (BoJ) Governor, Haruhiko Kuroda reiterated that the central bank was ready to expand monetary stimulus if required to achieve its 2.0% inflation target. The pair traded at a high of 102.80 and a low of 100.00 during the previous week. The pair is expected to find its first support at 99.43 and first resistance at 102.23. The second support is expected at 98.31 and second resistance at 103.91. Moving ahead, market participants look forward to Japan’sindustrial production, machinery orders and machine tool orders all scheduled for release this week.

USDCHF

Last week, the USD traded 1.03% higher against the CHF and closed at 0.9833. On the data front, Switzerland’s seasonally adjusted unemployment rate steadied on a monthly basis in June. Separately, consumer prices rose on a monthly basis in June, while on an annual basis consumer prices dropped in the same month. During the previous week, the pair traded at a high of 0.9866 and a low of 0.9685. Immediate downside, the first support level is seen at 0.9723, followed by 0.9614, while on the upside, the first resistance level situated in 0.9904, followed by 0.9976. Going forward, investors this week would watch the sole economic release being Switzerland’s producer and import prices for further cues in the Swiss Franc.

USDCAD

During the previous week, the USD traded 1.02% higher against the CAD and ended at 1.3044. On the data front, Canada’s unemployment rate eased less-than-expected in June, slipping to an eleventh month low. Moreover, Ivey purchasing managers’ index expanded more-than-expected, crawling out of the contraction territory. Meanwhile, the nation’s international merchandise trade deficit narrowed less-than-expected in May, amid a slump in the value of both exports and imports. Additionally, RBC manufacturing PMI expanded but at a slower pace in June. The USD hit a high of 1.3090 and a low of 1.2832 against the CAD in the previous week. Immediate downside, the first support level is seen at 1.2887, followed by 1.2731, while on the upside, the first resistance level situated in 1.3145, followed by 1.3247. Moving ahead, market participants would closely watch Bank of Canada’s interest rate decision and rate statement for further direction in the CAD. Further, new housing price index and manufacturing shipments will be on investors’ radar.

AUDUSD

The AUD strengthened against the USD last week, closing 0.95% higher at 0.7569. The Reserve Bank of Australia maintained the benchmark interest rate at 1.75%, in its recent monetary policy meeting. Macroeconomic data revealed that Australia’s trade deficit expanded unexpectedly in May. Moreover, the nation’s retail sales advanced at a slower-than-expected pace on a monthly basis in May. Additionally, Australia’s service sector expanded for a second straight month in June, while construction sector advanced making its way back into the expansion territory. The pair traded at a high of 0.7574 and a low of 0.7408 during the previous week. Immediate downside, the first support level is seen at 0.7460, followed by 0.7351, while on the upside, the first resistance level situated in 0.7626, followed by 0.7683. Moving ahead, market participants will keep an eye onAustralia’s unemployment rate and consumer inflation expectations for further direction. Moreover, traders will watch NAB’s business confidence and Westpac consumer confidence indices for further cues.

Gold

Gold traded 1.86% higher during the previous week, closing at USD1366.33 per ounce, amid renewed fears of Brexit impacting global economic growth, boosted demand for the precious yellow metal.  Gold hit a high of USD1377.50 per ounce and a low of USD1336.30 per ounce during the previous week. Gold is expected to its find support at USD1343.30 per ounce, and a fall through could take it to the next support level of USD1319.20 per ounce. The yellow metal is expected to find its first resistance at USD1384.50 per ounce, and a rise through could take it to the next resistance level of USD1401.60 per ounce.

Crude Oil

Last week, crude oil traded 7.31% lower and ended at USD45.41 per barrel, amid a slower decline in the global crude glut and a broad strength in the US Dollar. Moreover, the American Petroleum Institute (API) reported that the the US Energy Department reported that crude oil inventories fell less-than-expected by 2.2mn bls last week, while the American Petroleum Institute (API) reported that crude oil inventories declined 6.7mn bls last week, falling for the seventh straight week. The commodity traded at a high of USD49.35 per barrel and a low of USD44.77 per barrel in the previous week. Immediate downside, the first support level is seen at USD43.48 per barrel, followed by USD41.83 per barrel, while on the upside, the first resistance level situated in USD48.06 per barrel, followed by USD50.99 per barrel.

Source: Direct Fx Broker (Review and Forex Rebates Up to 85%)