Weekly Market Watch

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Released Monday, 23 January 2012

Last week recap



EUR/USD recovered considerably last week despite the previous week’s downgrades and as European economic data improved. Also, successful bond auctions in several Eurozone nations helped support the rate, showing renewed confidence in the Euro. The week began on a positive note as the rate traded off of its weekly low of 1.2625 and consolidated after ECB President Draghi stated that, “To a great extent, markets anticipated these ratings changes and priced their assets as if these ratings had already been issued.” The pair continued higher Tuesday as German ZEW Economic Sentiment improved to -21.6, significantly higher than the -49.7 that was expected, also, EZ ZEW Economic Sentiment improved to -32.5, versus an expected reading of -48.7. Also supporting the rate was better than expected results from bill auctions for Spain, Greece and the EFSF. Wednesday saw the rate continue higher as the IMF announced it was considering increasing its lending resources by $1 T. Eco-data for Wednesday had U.S. PPI decline by -0.1% m/m, versus an expected increase of +0.1%, while U.S. TIC Long Term Purchases increased to 59.8B, more than twice the expected 27.3B, with the previous number significantly revised higher from 4.8B to 8.3B. On Thursday, the pair extended gains Spain and France held successful bond auctions. Thursday’s numbers included the European Current Account, which contracted by -1.8B, versus an expected expansion of +0.5B, also, U.S. Core CPI came out at +0.1% as widely expected, while Initial Jobless Claims dropped to 352K, versus 387K expected. The rate then made its weekly high of 1.2985 on Friday before selling off as traders took profits and ahead of discussions by Greece with private creditors on a possible debt swap deal ahead of a March 20th maturity date. EUR/USD went on to close the week at 1.2932, showing an overall gain of +1.9%.



JPY/USD continued range bound, showing very little change for the third consecutive week as Japan reported mixed economic data last week. The week began with the rate opening higher Monday, and subsequently selling off as Japanese Core Machinery Orders showed an increase of +14.8% m/m, significantly higher than the increase of +5.8% that was expected. On Tuesday, the pair traded higher after it made its weekly low of 76.54 as Japan’s Tertiary Industry Activity declined by -0.8%, versus an expected decline of only -0.3%. Wednesday saw the rate consolidate as Japanese Revised Industrial Production declined by -2.7%, versus -2.4% expected. On Thursday, the pair rallied, making its weekly high of 77.31 as the United States reported favourable Initial Jobless Claims. The rate then sold off on Friday, after U.S. Existing Home Sales came out lower than expected, bringing the rate to close at 76.96, a gain of one pip from its previous weekly close and virtually unchanged on the week.


GBP/USD gained last week as confidence in European assets increased and despite the UK Unemployment rate increasing to its highest level in 16 years. The week began on a positive note as Cable traded higher after making its weekly low of 1.5272 on Monday after the UK Rightmove HPI declined by -0.8% m/m, versus a previous reading of -2.7%. The pair then traded sharply higher on Tuesday as UK CPI declined to 4.2% from 4.8% as widely expected. On Wednesday, Cable continued its ascent as UK Claimant Count Change dropped to 1.2K, versus an expected 9.1K, nevertheless, UK Unemployment increased to 8.4% from 8.3%. Thursday saw the rate continue its rally despite positive U.S. economic data and UK Nationwide Consumer Confidence dropping to 38, versus an expected 41 reading. Cable then made its weekly high of 1.5567 on Friday as UK Retail Sales increased by +0.6% as widely expected, bringing Cable to close at 1.5565, showing an overall gain of +1.6 from its previous weekly close.



AUD/USD gained ground last week as risk appetite improved; commodity prices increased and Australia reported mixed economic. The week began with the rate trading higher off of its weekly low of 1.0252 as Australia reported ANZ Job Advertisements dropped by -0.9% m/m, versus a previous reading of +0.1%, and Australian Home Loans, which increased by +1.4% m/m, versus an expected +1.0% rise. The pair continued higher on Tuesday as Australian Westpac Consumer Sentiment survey came out at +2.4% versus a previous reading of -8.3. On Wednesday, the Aussie continued rallying despite Australian New Motor Vehicle Sales declining by -2.9%, versus an expected increase of +2.3%. Thursday saw the rate consolidate marginally lower as Australia reported Employment Change decreased by -29.3K, versus an expected increase of +10.2K; nevertheless, the Australian Unemployment Rate decreased a notch to 5.2% from 5.3%. Also out on Thursday was Australian MI Inflation Expectations, which came out at +2.8%, versus a previous reading of +2.4%. On Friday, the pair made its weekly high of 1.0485 after Australian Import Prices increased by +2.5% q/q, versus an expected increase of only +0.9%, bringing the rate to close at 1.0482 with a gain of +1.7% overall for the week.



CAD/USD CAD lost ground last week as the BOC left rates unchanged and Canada reported mixed economic numbers. The week began on a soft note, with the pair selling off after making its weekly high of 1.0251 on Monday with no significant economic data out of either country. On Tuesday, the rate continued losing ground after the BOC left its benchmark Overnight Rate unchanged at 1.0% as was widely expected. Also supporting the Loonie on Monday were Canadian Foreign Securities Purchases, which increased to +14.99B, versus an expected +6.97B, with the previous number significantly revised upward from +2.03B to +3.85B. Wednesday saw the rate make its weekly low of 1.0069 after a BOC press conference in which BOC Governor Mark Carney stated that, "Europe is the biggest external threat to Canada without question, this is an economy, which through no fault of our own, faces considerable external headwinds, there are significant downside risks that are coming from ... notably Europe." On Thursday, the rate reversed and began trading higher despite Canadian Manufacturing Sales increasing by +2.0% m/m, versus an expected increase of +1.0%. The pair continued trading higher on Friday after Canadian Core CPI declined by -0.5% m/m, versus an expected drop of only -0.2%, while CPI fell -0.6%, versus an expected decline of 0.1%, and Canadian Wholesale Sales, which fell by -0.4% m/m, versus an expected increase of +0.8%. The rate went on to close the week at 1.0130, showing an overall decline of -0.9% for the week.



NZD/USD rose last week as risk assets gained favour in light of increasing confidence in the Eurozone and with mixed economic data out of New Zealand. The week began on a positive note with the rate trading higher after making its weekly low of 0.7915, as New Zealand reported NZIER Business Confidence came out with a flat reading, versus a previous reading of +25. The pair continued higher on Tuesday after the New Zealand REINZ HPI dropping by -0.1% m/m, versus a previous reading of +1.1%. The rate continued higher on Wednesday as New Zealand CPI dropped by -0.3% q/q, versus an expected increase of +0.4%. On Thursday, the pair consolidated lower as the United States reported mixed economic data. The rate then made its weekly high of 0.8060 on Friday as U.S. Existing Home Sales failed to meet analyst expectations, bringing the rate to close at 0.8058, showing an overall gain of +1.7% overall for the week.

The week ahead

AUD The upcoming Australian economic calendar is less active than last week, featuring the key CPI data due out on Wednesday. The data week starts on Monday with PPI (0.4%), and Tuesday’s highlights include the CB Leading Index (last 0.6%). Wednesday then features the MI Leading Index (last 0.1%), CPI (0.2%) and Trimmed Mean CPI (0.6%). That concludes the week’s releases since Thursday is a Bank Holiday and Friday is quiet. Resistance for AUD/USD is seen at 1.0485 and 1.0751, with support noted at 1.0376/84, 1.0230 and 1.0143.

CAD The upcoming Canadian economic calendar is about as active as last week, featuring the key Core Retail Sales data due out on Tuesday. Monday starts the week with the Leading Index (0.6%), and Tuesday’s highlights include Core Retail Sales (0.2%) and Retail Sales (0.3%). Wednesday then features a speech by BOC Governor Carney. That concludes the week since Thursday and Friday are quiet. Resistance for USD/CAD is seen at 1.0160, 1.0282/1.0318 and 1.0422, while support shows at 1.0051/78 and 0.9891.

EUR The upcoming Eurozone economic calendar is busier than last week, featuring the key German Ifo Business Climate survey out on Wednesday. Monday is quiet, so Tuesday starts the week with French Flash Manufacturing PMI (49.3), French Flash Services PMI (50.5), German Flash Manufacturing PMI (49.1), German Flash Services PMI (52.6), EZ Flash Manufacturing PMI (47.4), EZ Flash Services PMI (49.1), the all-day ECOFIN Meetings, Industrial New Orders (-2.1%) and the Belgium NBB Business Climate survey (-10.1). Wednesday then features the German Ifo Business Climate survey (107.7) and ECB President Draghi speaks. Thursday offers the GfK German Consumer Climate survey (5.6), and Friday’s data concludes the week with the EZ M3 Money Supply (2.3%). Resistance for EUR/USD is seen at 1.2985, 1.3076 and 1.3197, with support showing at 1.2857/77, 1.2623/65 and 1.2586

GBP The upcoming UK economic calendar is a bit busier than last week, featuring the key Preliminary GDP data out on Wednesday. Monday starts the week with a speech by MPC Member Posen, and Tuesday’s highlights include Public Sector Net Borrowing (12.7B) and a speech by BOE Governor King. Wednesday then features the MPC Meeting Minutes (0-0-9), Preliminary GDP (-0.1%), BBA Mortgage Approvals (35.3K) and CBI Industrial Order Expectations (-19). Thursday offers CBI Realized Sales (1). That concludes the week since Friday is quiet. Resistance to the topside for GBP/USD shows at 1.5668 and 1.5768/79, while support for the pair is expected at 1.5326/1.5499, 1.5232/70 and 1.5123

JPY The upcoming Japanese economic calendar is considerably busier than last week, featuring the key BOJ Overnight Call Rate Decision tentatively scheduled for Tuesday. Monday is quiet, so Tuesday starts the week with the tentatively scheduled BOJ Monetary Policy Statement, Overnight Call Rate Decision (<0.10%) and associated BOJ Press Conference. Wednesday then features the Trade Balance (0.36T) and BOJ Monthly Report. Thursday is quiet, and Friday’s data concludes the week with Tokyo Core CPI (-0.3%), the BOJ Monetary Policy Meeting Minutes and Retail Sales (2.3%). Resistance for USD/JPY currently shows up at 77.06/68, 78.15/28 and 79.52/80.22, with support indicated at 76.55/66, 75.94 and 75.56.

NZD The upcoming New Zealand economic calendar is about as quiet as last week, featuring the key RBNZ Official Cash Rate Decision due out on Thursday. Monday, Tuesday and Wednesday are quiet, so Thursday starts the week with the RBNZ Official Cash Rate Decision (2.5%) and its associated Rate Statement. Friday’s data concludes the week with the Trade Balance (-47M). The chart for NZD/USD shows resistance at 0.8080 and 0.8242. On the downside, technical support is expected at 0.7979/96, 0.7864, and 0.7650.

USD The upcoming U.S. economic calendar is about as active as last week, featuring the key Fed Funds Rate Decision on Wednesday. Monday and Tuesday are quiet, so Wednesday starts the week’s key releases with Pending Home Sales (-0.3%), Crude Oil Inventories (last -3.4M), plus the Federal Funds Rate Decision (<0.25%) and associated FOMC Statement. Thursday offers Core Durable Goods Orders (1.0%), Weekly Initial Jobless Claims (371K), Durable Goods Orders (2.1%) and New Home Sales (322K). Friday’s data concludes the week with Advance GDP (3.1%), Advance GDP Price Index (2.0%) and the Revised University of Michigan Consumer Sentiment survey (74.2). Also, the World Economic Forum’s annual meetings are going to take place in Davos, Switzerland this week from Wednesday, January 25th through Sunday the 29th. The WEF meetings are traditionally attended by central bankers, government and business leaders, and finance and trade officials from more than 90 nations. The influential meetings are usually open to the press, so influential officials sometimes talk with reporters during the day, and their comments may have an impact on one or more major currencies.


Open the calendar

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