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Weekly Market Watch - Monday, 8 February 2010
Subscribe to our weekly "Market Watch" newsletter. Last Week RecapEUR: European sovereign debt concerns continued weighing on EUR/USD, despite a stability plan for Greece being approved by the European Commission on Wednesday after which the rate made its weekly high of 1.4026. Nevertheless, Spain also ran into trouble as it announced on Wednesday that its 2009 budget deficit would come in at a higher-than-previously-forecast 11.4% of GDP in 2009. As a result, the pair’s slide continued on Thursday with resumed credit concerns, this time focusing on Portugal which had to cut the size of its bill auction to 300 million Euros from 500 million. Credit-default swaps on all three countries rose to record highs by the end of the week. Also on Thursday, the ECB kept its refinancing rate unchanged at 0.1% as was widely expected, and the U.S.-based Dow Jones Industrial Average dropped 300 points. The rate continued falling into Friday, making a weekly low of 1.3584, as U.S. Non-Farm Payrolls were released showing a – 20K drop versus a consensus of a +13K rise. Also, better-than-expected U.S. Unemployment Rate numbers of 9.7% came out versus a consensus of 10%. The combination left EUR/USD to close on Friday at 1.3675, off 1.4% on the week. On Saturday, at the G-7 meeting in Iqaluit, Canada, ECB President Trichet gave reassurances that Greece would meet targets to rein in its budget gap.JPY: USD/JPY started the week on a positive note with the rate making a weekly high of 91.27 on Wednesday as risk-aversion continued to permeate the markets. The pair then dropped on Thursday, making its weekly low of 88.53. USD/JPY subsequently recovered on Friday after U.S. employment numbers showed mixed results. The pair went on to close at 89.18, down 1.2% from the previous week. Over the weekend, at the G-7 meeting in Iqaluit Canada, Japanese Finance Minister Naoto Kan referred to the wide Japanese budget gap when stating, "I explained Japan''s fiscal situation to the G7 and frankly expected more discussion about it. But much time was spent exchanging views on Greece." GBP: GBP/USD traded considerably lower last week, despite the BOE’s announcement that it would put its quantitative easing program on hold. The rate managed to rally to a weekly high of 1.6068 on Wednesday ahead of Thursday’s BOE Monetary Policy Committee meeting which voted to maintain its asset protection program unchanged at 200B Pounds, as was widely expected. The BOE also stated, "considerable stimulus from the easing in monetary policy, the lower level of Sterling and the recovery in U.K. export markets should together support domestic activity." Cable then promptly resumed its downward direction after the announcements on Thursday as world stock markets slid in reaction to sovereign debt concerns. The rate’s slide was compounded on Friday by the U.S. employment report, bringing GBP/USD to a weekly low of 1.5556 before bouncing slightly to end the week at 1.5637, down by a bit more than 2% on the week. AUD: AUD/USD began on a strong note early in the week, making a weekly high of 0.8925 ahead of the RBA’s surprise announcement on Tuesday that it would not raise the Official Cash rate currently at 3.75%, when the market was discounting a 25 basis point rise. In his associated statement, RBA Governor Stevens noted that, “monetary policy will, over time, need to be adjusted further in order to ensure that inflation remains consistent with the target over the medium term.” AUD/USD then headed south, despite better-than-expected Australian Building Approvals out on Thursday which showed a 2.2% increase month-on-month versus a flat market consensus, and partly as a result of sliding commodity and stock prices as investors headed for safety late last week. The rate continued weakening into Friday, making a low of 0.8576 before bouncing on short-covering to end the week at 0.8681, off 1.7%. CAD: USD/CAD traded in an uncharacteristically wide range last week, starting on a weak note with the pair making its weekly low of 1.0543 on Wednesday. Thursday’s announcement by Statistics Canada supported the Canadian Dollar by showing that the Canadian Unemployment Rate had fallen 0.2% to 8.3%, with 43K new jobs created in Canada last month. This contrasted with the consensus expectation that the rate would be unchanged at 8.5%, with only 15.2K new jobs. Nevertheless, Canadian Building Permits rose by only 2.4% last month, versus a consensus of 2.9%. Also, the Ivey Purchasing Managers’ Index came in weaker-than-expected at 50.8% when the market was looking for 52.2%. USD/CAD eventually rallied to its weekly high of 1.0779 on Friday before settling at 1.0713, up just 12 pips, and closing virtually unchanged on the week. NZD: NZD/USD continued its slide from the previous week despite starting last week off on a positive note. The pair made a high of 0.7150 on Wednesday ahead of the New Zealand employment numbers out on Thursday which showed that the N.Z. Unemployment Rate had risen to 7.3%, a 10-year high, versus a market consensus of 6.8%. NZD/USD then resumed its downward direction on the back of this disappointing news, eventually making its weekly low of 0.6806 on Friday after the U.S. employment report was released. The rate eventually recovered somewhat to settle at 0.6891, off 1.6% on the week. The Week AheadUSD: Despite last week’s risk-adversity that strongly-favoured the U.S. Dollar, technical factors indicate that the coming week may see some consolidation of its recent gains. Furthermore, the upcoming week is lighter in terms of U.S. economic data scheduled for release, so traders will have less reason to buy the Greenback. The weekly highlight will be on Wednesday with the U.S. Trade Balance (-35.7B) and Fed Chairman Bernanke’s testimony before the House Financial Services Committee scheduled, followed by the Federal Budget Balance (-66.2B). Thursday has Retail Sales (0.4%M/M and 0.4%M/M Core) and Jobless Claims (458K), while Friday offers the Preliminary University of Michigan Consumer Sentiment Index (74.7).AUD: The Australian economic calendar again has some interesting data coming out this week, beginning with the NAB Business Confidence index (last 8 and 16 Quarterly) tentatively-scheduled for Monday. Tuesday has the Westpac Consumer Sentiment Index (last 5.6%) and Home Loans (-4.7% M/M) scheduled. Wednesday ends the week with MI Inflation Expectations (last 3.5%) and the highlighted Australian Employment Report with 15.1K expected for the change and 5.6% forecast for the Unemployment Rate. Technically, AUD/USD is in oversold territory with the 14-day RSI at 29 and the rate approaching its 200-day MA at 0.8559, so some consolidation of recent losses appears likely over the coming week. The initial 1:1 Fibonacci projection target of the move from 0.8733 to 0.9405 off of the 0.9328 high at 0.8656 has now been attained in the move to 0.8577, and so look for the 1:1.236 ratio at 0.8497 and the 1:1.382 ratio at 0.8399 to provide extension targets. Resistance shows at 0.8717, 0.8915/26 and 0.9047, while support comes in at 0.8606, in the 0.8543/86 region, and below that at the 0.8238 Aug/Sep 09 double bottom. To view live charts follow these links: AUD/USD AUD/EUR AUD/GBP AUD/JPY AUD/NZDNZD: The upcoming economic data week is relatively peaceful in New Zealand and starts on Sunday with QV House Prices (last 2.8% Y/Y). NZ Card Spending (last 0.7%M/M) is scheduled for release on Tuesday, while Wednesday has the Business New Zealand Performance of Manufacturing Index (last 52.9) and the Food Price Index (last -0.3%M/M) due out. Thursday should be the highlight with Retail Sales (0.7% and 0.3% Core M/M) schedule for release. From a technical perspective, NZD/USD has now broken convincingly below key psychological support at 0.7000. Nevertheless, the rate is flirting with oversold territory as its 14-day RSI touches 30, and it also has its 200-day MA at 0.6849 to contend with. While the outlook for NZD/USD remains bearish while the rate trades below 0.7149, support is seen at 0.6806, 0.6683 and 0.6475. Resistance to the topside shows at 0.6930, in the 0.6993/0.7000 region, then at 0.7087 and 0.7149. To view live charts follow these links: NZD/USDGBP: This coming week lightens up in terms of economic data due out in the United Kingdom. The U.K. calendar starts on Monday with the BRC Retail Sales Monitor (last 4.2%) and the RICS House Price Balance (29%). Tuesday offers the U.K. Trade Balance (-6.6B), while Wednesday looks like the weekly highlight with Manufacturing and Industrial Production (0.4% and 0.2%M/M), followed by a press conference by BOE Governor King in London about the BOE Inflation Report also schedule for release. The NIESR GDP estimate is also tentatively scheduled for Wednesday. Friday only has the CB Leading Index (last 0.9%M/M) due out. On the technical front, the continued fall in GBP/USD last week has reaffirmed its bearish outlook, with a break of the key 1.5801 and 1.5706 range bottoms provoking further selling pressure that has now broken into oversold territory with its 14-day RSI at 29. Also, the initial 1:1 projection of the move from 1.7041 to 1.5706 off of the 1.6876 reaction high at 1.5541 has now probably played out in the move to 1.5557. Nevertheless, look for the 1:1.236 projection at 1.5226, and then perhaps the 1:1.382 projection at 1.5031 to come into play if the 1:1 level breaks convincingly. Resistance shows at 1.6068, 1.6274 and 1.6456, with initial support coming in at 1.5557, then at 1.5372 and 1.5058. To view live charts follow these links: GBP/USDEUR: The Eurozone is also not that active this coming week, although the upcoming Spanish budget may cause some further debt-related concerns. The economic release calendar starts on Monday with the Sentix Investor Confidence Index (-2.3), followed on Tuesday by the German Final CPI (-0.6%M/M) and Trade Balance (14.6B). Wednesday has French and Italian Industrial Production (0.6% and 0.0%M/M respectively) due out, while Thursday offers the German Wholesale Price Index (0.1%) and the ECB’s Monthly Bulletin. Friday looks like the weekly highlight, with German, French and Italian Preliminary GDP (0.1%, 0.5% and 0.1% Q/Q respectively) and Flash GDP (0.4%Q/Q), in addition to French Non-Farm Payrolls (0.2%Q/Q) and Eurozone Industrial Production (0.3%M/M) scheduled for release. Technically, EUR/USD again made new lows within its recent decline last week, keeping the outlook bearish and firmly below its 200-day Moving Average at 1.4332. Now that the initial projection target of 1.3655 has been attained, the currently-oversold market (RSI at 23) may see a correction higher first before extending lower. Support for EUR/USD comes in at 1.3423, 1.3246 and 1.2965, while resistance can be found at 1.3742, 1.3852 and 1.4026. To view live charts follow these links: EUR/USDJPY: The economic week ahead is considerably lighter in Japan, with little of note due for release. Sunday has the Current Account (1.27T), M2 Money Stock (3.0%Y/Y) and Bank Lending (last -1.0%Y/Y), while Monday has the Economy Watchers Sentiment index (35.9). Tuesday has Preliminary Machine Tool Orders (last 63.4%Y/Y) and the Corporate Goods Price Index (-2.3%Y/Y). Wednesday will be a Bank Holiday in Japan, Thursday is quiet and Friday only has Household Confidence (38.2) scheduled for release. With respect to the technical picture, USD/JPY saw a continuation of its retracement of the move from 84.80 to 93.77 last week that took it close to the 61.8% Fibonacci retracement level at 88.23. Although the rate remains below its 200-day MA at 92.73, it is not in oversold territory, and resistance is seen at the declining trend line currently drawn at 90.95. Additional resistance comes in at 89.87 and 91.26, while support shows at 88.54/81, 87.35 and 85.86. To view live charts follow these links: JPY/USDCAD: The economic data week in Canada is again fairly light, with only Housing Starts (180K) and a speech by BOC Deputy Governor Duguay in Lévis scheduled for Monday. Wednesday has the important Canadian Trade Balance (-0.1B) due out, while Thursday offers the New Home Price Index (0.4%M/M) and Friday ends the week with New Motor Vehicle Sales (2.0%M), followed by a speech by BOC Governor Carney in Mumbai, India. With respect to the technical picture, USD/CAD’s strong rally last week brought it close to the 1:1 ratio of the move from 1.0205 to 1.0868 projected off the Jan 14th 1.0223 low at 1.0886. With the RSI not yet overbought look for an eventual test of that level, although USD/CAD’s 200-day MA currently at 1.0876 may prove tough to exceed initially. Beyond that, look for the 1:1.236 projection at 1.1042 to come into play and if that level is exceeded, then the 1:1.382 projection at 1.1139 would be targeted. Initial resistance comes in at 1.0745/79, then at 1.0868 and 1.9057. Support for USD/CAD shows at 1.0654, 1.0544 and in the 1.0437/62 region. To view live charts follow these links: CAD/USD
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