The highlight of the week was the European Central Bank’s (ECB) surprise decision to scale down its massive monthly bond-buying program. The ECB, in its last monetary policy meeting of the year, left the key interest rate unchanged at 0.0% and announced that it will extend its monthly asset purchase program until December 2017, while leaving the door open for an extension “if necessary”. The central bank is set to reduce its bond buying program to €60.0 billion a month from €80.0 billion a month.
Another set of data indicated that, economic growth in the Eurozone was confirmed at 0.3% on a quarterly basis in the third quarter of 2016. Additionally, the region’s retail sales rebounded at its strongest pace in more than two years in October. On the contrary, activity in the region’s services sector unexpectedly slowed in November, while the Sentix investor confidence index surprisingly weakened in December.
The US Dollar ended the week higher, after the US non-manufacturing PMI accelerated to its highest level in thirteen-months in November, highlighting that the economy is continuing to expand strongly heading towards the year end. Also, the nation’s flash Reuters/Michigan consumer confidence index jumped in December, pushing the index to its highest level since January 2015 and indicating that Americans are getting increasingly optimistic about the nation’s growth prospects. Further, the nation’s factory orders surged to its highest level in 16-months in October, suggesting that the nation’s manufacturing sector is gaining momentum, after struggling to gain traction throughout the year. Moreover, the number of American filing for fresh jobless benefits fell in line with estimates in the week ended 03 December 2016, thus pointing towards a healthy labor market. Meanwhile, consumer credit marked its slowest rate of increase in 4-months in October. Also, the nation’s final durable goods orders came in better than expected in the same month. On the contrary, the nation’s trade deficit widened to its highest level since March 2015 in October, as imports surged to a 14-month peak.
The Pound ended the week on a weaker footing, after an unexpected downturn in UK’s manufacturing and industrial sector dented the nation’s growth outlook in the fourth-quarter. Data revealed that UK’s industrial production unexpectedly declined to a four year low in October, while the nation’s manufacturing production surprisingly posted its largest decline in eight-months in the same month. Moreover, activity in the nation’s construction sector unexpectedly advanced at the fastest pace since March 2016 in November, suggesting that the nation’s construction sector is on the recovery-path after going through a slump in the wake of the historic Brexit vote.
EURUSD
The EUR traded 1.04% lower against the USD last week, with the pair closing at 1.0559, after the ECB, in its monetary policy meeting, decided to extend its QE program by an extra nine months or beyond, if necessary. In other economic news, the Eurozone’s seasonally adjusted final GDP rose 0.3% QoQ in the third quarter of 2016, while the region’s retail sales rebounded in October. Meanwhile, Germany’s seasonally adjusted industrial production rebounded less than expected in October. Moreover, the nation’s Markit construction PMI advanced in November, while final Markit services PMI surprisingly climbed in the same month. The EUR hit a high of 1.0874 and a low of 1.0531 against the USD in the previous week. The pair is expected to witness its first support at 1.0435 and second support at 1.0312, while the first resistance is expected at 1.0778 and second resistance at 1.0998. This week, investors would focus on the consumer price inflation, the flash Markit manufacturing and services PMI and the ZEW economic sentiment index across the Eurozone, to gauge strength in the European economy.
GBPUSD
Last week, the GBP traded 1.14% lower against the USD and closed at 1.2574, after UK’s industrial and manufacturing production unexpectedly declined in October. In other economic news, the nation’s Markit services PMI unexpectedly jumped in November, whereas construction PMI unexpectedly advanced in the same month. Meanwhile, NIESR predicted that UK economy grew 0.4% in the three months to November. Further, the nation’s Halifax house price index rose in line market expectations in November and RICS house price balance climbed in the same month. During the previous week, the pair traded at a high of 1.2775 and a low of 1.2549. The pair is expected to find its first support at 1.2492 and first resistance at 1.2718. The second support is expected at 1.2407 and second resistance at 1.2859. Looking ahead, market participants would anxiously await the BoE’s interest rate decision along with UK’s consumer price inflation, ILO unemployment rate and retail sales data, all scheduled to release this week.
USDJPY
The USD advanced against the JPY last week, closing 1.6% higher at 115.36, after Japan’s final GDP unexpectedly slowed to 0.3% on a quarterly basis in 3Q 2016. Also, the nation’s consumer confidence index surprisingly fell in November, whereas the nation’s (BOP basis) trade surplus narrowed more than estimated in October. Another set of data showed that the nation’s Nikkei services PMI advanced in November and the BSI large manufacturing index increased on a quarterly basis in 4Q 2016. Moreover, the nation’s Eco-Watchers survey for the current situation rose in November, while the survey for the future outlook edged up in the same month. During the previous week, the pair traded at a high of 115.37 and a low of 113.13. The pair is expected to find its first support at 113.79 and first resistance at 116.03. The second support is expected at 112.34 and second resistance at 116.82. Moving ahead, traders would keep a close watch on Japan’s flash Nikkei manufacturing PMI, Tankan large manufacturers index, industrial production, machine orders, tertiary industry index and machine tool orders data, all due to release this week.
USDCHF
Last week, the USD traded 0.64% higher against the CHF and closed at 1.0175. The Swiss Franc lost ground after Switzerland’s consumer price index dropped more than estimated on a monthly basis in November. Meanwhile, the nation’s seasonally adjusted unemployment rate remained unchanged at 3.3% in November at par with market expectations. During the previous week, the pair traded at a high of 1.0214 and a low of 1.0021. The pair is expected to find its first support at 1.0060 and first resistance at 1.0253. The second support is expected at 0.9944 and second resistance at 1.0330. Investors this week await the release of Swiss National Bank’s (SNB) interest rate decision accompanied with Switzerland’s ZEW economic survey and SECO economic forecast all slated to release this week.
USDCAD
Last week, the USD traded 0.88% lower against the CAD and closed at 1.3175. The Bank of Canada (BoC), in its recent monetary policy meeting, held the benchmark interest rate steady at 0.50%, as widely expected, stating that Canadian economy experienced a healthy rebound in the third quarter, following a slump earlier in the year and is growing as expected, despite lingering uncertainty in the US and its other major trading partners. The central bank further added that although the nation’s growth rebounded strongly during the third quarter, the economy is expected to shift to moderate growth in the fourth quarter, as business investment and non-energy goods exports continue to disappoint. In other economic news, the nation’s building permits unexpectedly surged in October, whereas new housing price index rose more than expected in the same month. On the other hand, the nation’s seasonally adjusted housing starts came in weaker than anticipated in November, while seasonally adjusted Ivey purchasing mangers’ index unexpectedly eased in the same month. The pair traded at a high of 1.3349 and a low of 1.3153 during the previous week. The pair is expected to find its first support at 1.3106 and first resistance at 1.3302. The second support is expected at 1.3031 and second resistance at 1.3423. Ahead in the week, market participants will concentrate on a speech by BoC Governor, Stephen Poloz, along with Canada’s existing home sales data, scheduled this week.
AUDUSD
Last week, the AUD traded 0.12% lower against the USD and closed at 0.7451. The Reserve Bank of Australia (RBA), in its latest monetary policy meeting, maintained the key interest rate steady at 1.50%, meeting market expectations. In a post-meeting statement, the RBA stated that “taking account of the available information, and having eased monetary policy earlier in the year, the policymakers found it prudent to hold the stance of policy unchanged at this meeting, as it would be consistent with sustainable growth in the economy and achieving the inflation target over time”. Further, the central bank acknowledged that the Australian economy is continuing its transition following the mining investment boom, with subdued outlook for business investment, although measures of business sentiment remain above average. Further, Australia’s AIG performance of services index climbed in November, whereas seasonally adjusted trade deficit unexpectedly expanded in October. The pair traded at a high of 0.7508 and a low of 0.7414 during the previous week. The pair is expected to find support at 0.7408, and a fall through could take it to the next support level of 0.7364. The pair is expected to find its first resistance at 0.7502, and a rise through could take it to the next resistance level of 0.7552. Looking ahead, Australia’s unemployment rate, NAB business confidence, Westpac consumer confidence and consumer inflation expectations data, scheduled to release this week, would garner significant amount of market attention.
Gold
Gold traded 1.49% lower during the previous week, closing at USD1159.86 per ounce, as mounting expectations of an interest rate hike by the Fed later this week and the ECB’s announcement of an extension to its QE program until December 2017, boosted gains in the greenback. Last week, the precious metal traded at a high of USD1183.50 per ounce and a low of USD1157.60 per ounce. The yellow metal is expected to witness its first support at USD1150.97 per ounce and second support at USD1141.33 per ounce, while the first resistance is expected at USD1176.87 per ounce and second resistance at USD1193.13 per ounce.
Crude Oil
Crude oil weakened in the previous week, closing 0.35% lower at USD51.50 per barrel, as mounting doubts whether OPEC’s production cut deal would be sufficient enough to reduce global supply-glut, dented demand for the commodity. Over the weekend, the OPEC and non-OPEC producers reached their first deal since 2001 to jointly reduce crude output in order to rein in swelling global crude supply and stabilize oil market. Meanwhile, the Energy Information Administration (EIA) reported a decline of 2.4 million barrels in the US crude stockpiles to 485.8 million barrels in the week ended 02 December, while the American Petroleum Institute disclosed that US crude oil inventories fell 2.2 million barrels in the same week. Crude oil witnessed a high of USD52.42 per barrel and a low of USD49.61 per barrel last week. Crude oil is expected to find support at USD49.93 per barrel, and a fall through could take it to the next support level of USD48.37 per barrel. The commodity is expected to find its first resistance at USD52.74 per barrel, and a rise through could take it to the next resistance level of USD53.99 per barrel.
Good trades Traders.
