The Week That Was…
At the beginning of this week majors continued to consolidate at the lower end of recent ranges. Once again the major mover early in the week was the USDJPY which was spurred on by Prime Minister Abe’s press conference during which he confirmed the much anticipated sales tax deferral and snap elections. The confirmation of these actions saw the USDJPY print new multi year highs. The mid week release of the FOMC minutes and reiteration of the hawkish tone from the October statement supported the USD which continues to test the top end of its recent range threatening to print new year to date highs.
As the week draws to a close Draghi took to the podium in Frankfurt and confirmed the ECB’s commitment to battling growth and deflation concerns keeping the potential for continued expansion of the ECB balance sheet firmly on the radar heading into the December meeting. The Aussie caught a much needed breather this morning with the PBOC announcing a reserve rate cut.
Next week we enter a holiday shortened week with Thanksgiving Holidays in the US, on the data front main catalysts will be US and UK GDP with one eye on Eurozone Employment data.
- USD traded marginally lower on Thursday as US economic data was mixed. Manufacturing industry expanded at a slower pace than expected in November but existing home sales rose to the highest level this year. US equities hit all-time highs but failed to support the USD.
- EUR met resistance after a two-day rally. November manufacturing and services growth weakened and were worse than expected, signalling downside risks to the economy. The market focus is now on the ECB policy meeting which is due in December.
- GBP closed marginally higher on Thursday. October retail sales were stronger than expected. The UK will release Q3 GDP and exports data next week. GBP is likely to be driven by economic data.
- JPY climbed above 118 and hit a seven-year high. The Fed expressed concerns on low inflation and reiterated that interest rates would remain low. There is speculation that monetary policies would diverge as US may raise rates next year
while Japan may add further stimulus. The next resistance level for USDJPY is likely at 120.
- CAD A strong inflation print which comes after continued surprises to the upside in CAD inflation. This is likely to challenge the BOC’s current outlook and lead to some repricing of rate expectations.
- AUD The RBA reiterated that the key interest rate will remain unchanged for an extended period. The RBA governor said that there may be a downside risks to the currency. However, China manufacturing industry expanded at the slowest pace in six months prompting a surprise reserve rate cut Friday morning by the PBOC.
- EURUSD Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bearish
- GBPUSD: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks) Bearish
- USDJPY: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bullish
- USDCAD: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bullish
- AUDUSD: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bearish
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