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Weekly Market Watch - Monday, 8 March 2010
Subscribe to our weekly "Market Watch" newsletter. Last Week RecapThe week for EUR/USD began with Eurozone Employment out on Monday which showed that the E.Z. Unemployment Rate had improved to 9.9% versus the 10.1% consensus. Also out on Monday, U.S. Personal Spending showed a rise of 0.5% M/M, slightly better than the 0.4% increase expected, and U.S. ISM Manufacturing PMI showed a slightly worse-than-expected 56.5 level versus the 57.7 consensus. U.S. Construction Spending came out right on target, dropping 0.6%. EUR/USD then declined substantially, making a nine-and-a-half month low of 1.3437 on Tuesday as the market expected Greece to fail in its efforts to shore up its budget deficit. Nevertheless, Greek Deputy Citizen Protection Minister Vougias announced on Wednesday that the Greek Cabinet had agreed to increased austerity measures totalling €4.8B, which sent EUR/USD to its weekly high of 1.3735. On Thursday, the European Commission stated that the Greek measures would be sufficient for 2010. After the ECB held a general council meeting, the central bank announced it would continue weekly refinancing operations and one-month auctions with full allotments until October 12th of 2010 when the bank expects to change to fixed allotments. In addition, the bank said it would not raise interest rates until November 2010, at the earliest. Also on Thursday, U.S. Jobless Claims showed 469K new claims, versus a consensus of 472K. Friday’s U.S. Non-Farm Payrolls data came out better-than-expected at -36K versus a consensus of -56K, along with the U.S. Unemployment Rate which remained unchanged at 9.7%, versus a 9.8% consensus. This data prompted EUR/USD to ease toward its weekly close at 1.3623, only six pips lower than the previous week, and essentially unchanged for the third straight week.USD/JPY was up considerably last week after the Japanese Unemployment Rate released Tuesday showed an unexpected drop of 4.9% versus a consensus of 5.1% which was considerably lower than the 5.8% number out for December. On Thursday, USD/JPY made its weekly low of 88.12 as Japanese Capital Spending figures came out at -17.8%, versus a market consensus of -18.1%. Nevertheless, the rate went on to recover substantially on Friday, making its weekly high of 90.57 as reports of the BOJ taking further easing measures and U.S. Non-Farm Payrolls data fuelled the rally. USD/JPY then backed off a bit on profit-taking to close the week at 90.25, up 1.5% from the previous weekly close. GBP/USD continued trending lower last week, after beginning the week on a volatile note as it traded off of its weekly high of 1.5237 on Monday before heading sharply lower. Sterling eventually traded to a 10-month low against the Dollar at 1.4778 the same day. The four-and-a-half big figure drop was attributed to a poll showing that neither party would gain a majority in the general election to be held later this year, resulting in a hung parliament unable to make key decisions. On Wednesday, the U.K. PMI Services Index showed its highest reading since January of 2007 at 58.4, versus a consensus of 55.0. On Thursday, the BOE announced it would hold interest rates and asset purchases unchanged, as was widely expected. In addition, the Halifax Housing Price Index disappointed the market by showing a large 1.5% decline M/M, versus a consensus of a 0.3% rise. Nevertheless, Cable managed to recover somewhat on Friday on position-squaring, closing at 1.5133, and down just 0.6% for the week. AUD/USD started the week trading off of its Monday low of 0.8933 ahead of the RBA Monetary Policy decision on Tuesday in which RBA Governor Stevens announced the Central Bank would raise its key Cash Rate by 25 basis points to 4.0%. The move was somewhat unexpected in light of the RBA’s February decision to leave the rate unchanged but proved to be justified following Wednesday’s announcement of a 0.9% increase in Q4 GDP, taking the annual rate of economic growth to an impressive 2.7%. AUD/USD continued improving as the Australian Trade Balance came out on Thursday, showing a deficit of 1.18B versus a consensus deficit of 1.57B and at the narrowest level seen in seven months. The additional contraction in the trade deficit was attributed to shrinking imports, which fell 3% M/M while exports rose only 1% M/M. Nevertheless, exports to China and coal and iron ore exports declined from the previous month’s levels. AUD/USD went on to close at 0.9075 on Friday, up 1.4% on the week. USD/CAD came off of its Monday weekly high of 1.0572 as the Loonie firmed after Canadian GDP showed a 0.6% growth versus a market consensus of a 0.4% contraction. Also, the Industrial Product Price Index or IPPI showed a 0.3% rise, lower than the 0.6% consensus, but the third consecutive monthly rise. Furthermore, the Raw Materials Price Index or RMPI showed a 3.3% rise versus a consensus of 2.1%, which set the tone for the rest of the week. Rising oil and gold prices also contributed to Loonie strength, sending USD/CAD to its weekly low of 1.0259 on Friday. The rate then traded higher on position-squaring to close at 1.0287, down an impressive 2.4% on the week. Last week, NZD/USD traded in a narrow range after starting the week on a softer note. The ANZ Commodity Price Index rose 3.8%, considerably higher than the 0.4% number previously seen. Also, Visitor Arrivals showed a month-on-month decline of 2.4%, versus the preceding 8.0% rise. The rate traded lower after these numbers, eventually making a weekly low of 0.6849 on Thursday. The rate then improved on Friday to make its weekly high of 0.6975, before closing just lower at 0.6965. This was a mere 13 pips lower than the previous week’s close and essentially unchanged. The Week AheadUSD: The U.S. economic calendar calms down somewhat next week, although key data due out may still give the market something to chew on. The week begins on Tuesday as the IBD/TIPP Economic Optimism Index (48.9) is due out. Wednesday offers the Federal Budget Balance (199.5B), and Thursday looks like the week’s highlight as the U.S. Trade Balance (-40.5B), Jobless Claims (453K), and a speech in London by FOMC Member Dudley are scheduled. Friday ends the week with key Retail Sales (-0.1% and 0.1% Core M/M), Preliminary University of Michigan Consumer Sentiment Index (74.0) and Business Inventories (0.2%) data due for release.AUD: After the RBA’s somewhat surprising rate change announcement early last week, the Australian economic calendar again has some interesting news scheduled. The week starts on Tuesday with ANZ Job Advertisements (last -8.1%M/M) and the NAB Business Confidence Index (last 15) scheduled for release. Wednesday has Westpac Consumer Sentiment (last -2.6%) plus Home Loans (2.1%M/M). Thursday looks like the weekly highlight with the Australian Employment Report (13K Change, 5.3% Rate), MI Inflation Expectations (Last 3.2%) and the RBA’s Bulletin due out to finish the week since Friday is quiet. In terms of its technicals, AUD/USD consolidated most of last week comfortably above its 200-day MA which currently comes in at 0.8686 and is still rising, thereby indicating the medium-term outlook remains bullish. Support now comes from a short-term upwards-slanting trend line now at 0.8890. Also, the 14-day RSI is still in neutral territory at 57, so the upside appears more likely to predominate over the coming week as this rally plays out that may ultimately lead AUD/USD towards its Nov 16th 2009 high of 0.9405. Resistance for AUD/USD shows on the chart at 0.9092, 0.9191 and 0.9321/28, while support is indicated 0.8785/99, 0.8709 and 0.8577. To view live charts follow these links: AUD/USDNZD: The coming week of economic data releases gets busier in New Zealand, starting on Monday with Manufacturing Sales (last 5.1%Q/Q). Tuesday has nothing of note, but Wednesday has the Overseas Trade Index (0.1%Q/Q) due out. Thursday will be the highlight featuring the RBNZ’s Official Cash Rate Announcement (expected to keep the rate unchanged at 2.50%) and the associated Press Conference and Rate Statement. Also look for the RBNZ’s Quarterly Monetary Policy Statement, in addition to the Business NZ Manufacturing Index (last 5r2) and the Food Price Index (last 2.1%M/M). Friday has the key Retail Sales data due out (0.3% and 0.6% Core M/M) to end the important week. From a technical perspective, NZD/USD traded just below its key psychological level at 0.7000 last week. This level also roughly coincides with the rate’s still-rising 200-day MA now at 0.6953 which the rate still managed to close the week above at 0.6969. NZD/USD now trades in neutral territory on the 14-day RSI at 48 and roughly in the centre of its daily Bollinger Bands, therefore recommending little in terms of short term direction. The upside break continues to be preferred, with potential targets in the 0.7250-0.7300 region near the major declining upper trend line resistance now at 0.7321. Support for NZD/USD is seen at 0.6846/52, 0.6806/16 and 0.6782, while resistance to the topside shows in the 0.6984/0.7016 and 0.7057/77 regions, and then at 0.7149. To view live charts follow these links: NZD/USDGBP: The upcoming economic data week looks fairly important for the United Kingdom. Also, circulating rumours of a near-term election date announcement abound, with the odds currently in favour of Thursday, May 6th. The U.K. calendar begins Monday with a speech in London by MPC Member Kate Barker, followed by the BRC Retail Sales Monitor (last -0.7%Y/Y) and the RICS House Price Balance (36%). Tuesday features the U.K. Trade Balance (-6.9B), and Wednesday looks important with Manufacturing Production (0.3%M/M), Industrial Production (0.2%M/M) and the NEISR GDP Estimate (last 0.4%). Look for Consumer Inflation Expectations (last 2.4%) on Thursday, followed on Friday by a speech from MPC Member and BOE Chief Economist Spencer Dale in Cambridge. On the technical side, GBP/USD made another new nine-month low at 1.4782 within its recent decline last week after sharply breaking the previous 1.5151 low. This approximately met the 1.618 Fibonacci projection target at 1.4767 of the move from 1.6876 to 1.5832 projected downwards from the 1.6456 reaction high. Furthermore, with the rate now keeping firmly below its 200-day MA, currently at 1.6240 and sloping downwards, the medium-term bearish outlook remains intact for GBP/USD. Nevertheless, the rate’s 14-day RSI has only just recovered from oversold territory and now comes in at 35, plus Cable is trading toward the lower of its daily Bollinger Bands which have widened due to recent volatility. As a result, some further correction of recent losses appears likely into the 1.5188-1.5322 range that would likely present a selling opportunity. Resistance for GBP/USD shows at 1.5165/80, 1.5265 and 1.5322, while support is indicated near current levels at 1.5129, and then below that at 1.4991, 1.4852 and the key 1.4782 low, in addition to the important psychological 1.5000 level. To view live charts follow these links: GBP/USD GBP/EUR GBP/JPY GBP/NZDEUR: The coming economic data week calms down a bit in the Eurozone too. Monday offers German Industrial Production (1.1% M/M), Tuesday the French Trade Balance (-3.8B), and Wednesday the German Trade Balance (16.7B), Italian and French Industrial Production (0.7% and 0.3%M/M), plus a speech in Frankfurt by ECB President Trichet. Friday ends the week as German WPI (0.6%M/M) and Eurozone Industrial Production (0.8%M/M) are released, plus a Trichet speech in Stanford, California. On the technical front, EUR/USD just about succeeded in making a new nine-month low last week by trading down to 1.3437. Along with the previous recent lows seen at 1.3444, 1.3451 and 1.3460, this seems to be part of a potential bottoming formation on the daily charts which may provoke some initial range-trading above it before EUR/USD picks up enough steam to move correctively higher. Nevertheless, rallies should be resisted by the upper declining trend line now at 1.3843 and supported by the lower trend line currently at 1.3153. That lower level, in addition to the range bottom at 1.3437, could well limit the downside for the coming week. Furthermore, the outlook for the medium-term remains bearish as EUR/USD trades well under its downward-sloping 200-day MA now at 1.4337, also its formerly-oversold 14-day RSI is now at 44. Support for EUR/USD shows at 1.3530/51, 1.3423/60 and 1.3246, while resistance to the topside can be found in the 1.3683/91 region, at 1.3735 and in the 1.3788 to 1.3839 congestion region. To view live charts follow these links: EUR/USDJPY: Another rather mellow economic data week is expected in Japan. Monday just offers the Japanese Current Account (1.25T) and M2 Money Supply (2.8%Y/Y), Tuesday has Leading Indicators (96.9%), and Wednesday has Core Machinery Orders (-3.6%M/M) and CGPI (-1.4%Y/Y). Thursday looks like the highlight with Final Japanese GDP data (1.0%Q/Q and -2.9% Price Index Y/Y). Friday ends the week with Revised Industrial Production (2.5%M/M). With respect to the technical picture, USD/JPY saw a sharp upwards correction last week from the 88.12 low seen on Mar 4th, eventually trading as high as 90.58, but still keeping below its 200-day MA now at 92.01, as well as a major declining trend line at 92.12. Each of these latter levels could continue to cap the upside 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 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 88.12 or 92.14. Resistance for USD/JPY shows at 90.58, 91.37 and in the 92.03/14 region, while support is indicated at 89.47, 88.73/81 and 88.12. To view live charts follow these links: JPY/USDCAD: The Canadian economic data week coming up offers some important events, beginning on Monday with Canadian Housing Starts (186K). Tuesday and Wednesday have little of note, but Thursday will be important with the Canadian Trade Balance (0.4B), NHPI (0.5%M/M), Capacity Utilization (70.2%) and a speech by BOC Governor Carney at Carleton University in Ottawa scheduled. Nevertheless, Friday looks like the weekly highlight with the key Canadian Employment data scheduled for release (17.5K Change and 8.3% Rate). Technically, USD/CAD sharp fall last week entirely erased its previous week’s gains and made a new short-term low at 1.0259, just ahead of upwards slanting trend line support now at 1.0232 and the previous significant Jan 14th low at 1.0223. Furthermore, USD/CAD’s 14-day RSI is heading toward oversold territory at 38 and the rate is trading near its lower daily Bollinger Band. This indicates that a bounce from current levels may be forthcoming as the rate continues to trade a range between 1.0779 and 1.0223, with 1.0501 being the pivot. Nevertheless, since the rate is trading well below its downward-sloping 200-day MA currently at 1.0766, the outlook remains bearish in the medium-term, so selling USD/CAD on rallies approaching the slightly declining range upper trend line now at 1.0753 would be indicated from that perspective. Resistance in USD/CAD comes in at 1.0368/80, 1.0441 and 1.0572, while support shows in the 1.0223/59 region, at 1.0205, in the 0.9973/90 region, and at the key psychological 1.0000 level. To view live charts follow these links: CAD/USD
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