Macro Economic/Political Events
Developments in Cyprus are underway as officials continue their discussions to bailout the ailing island nation. Among the key developments is the institution of capital controls which includes enforcing no cap on the amount that debit and credit cardholders can spend within the country; withdrawal limit of EUR300 daily; overseas purchase limit of EUR 5,000 monthly; encashing of checks are banned, among others. These controls are said to be subject for review on a daily basis and are expected to last for a month or so.
Banks in Cyprus have reopened while the stock exchange remained close. According to the stock exchange’s Chief Executive Officer Nondas Metaxas, the stock exchange may open for limited trading on Tuesday (April 2) after being closed for about two weeks since Cyprus faced the financial crisis.
In other news, New Zealand surprised the market with a much better than expected February Trade Balance data on Tuesday. Statistics New Zealand reported a whopping NZD414 million surplus compared to an expectation of just NZD2 million. January’s reading was also revised higher to minus NZD287 million from minus NZD305 million. Consumption goods in the form of sheep meat and milk powder contributed the most in the rise of exports to China.
Meanwhile, US Revised University of Michigan Consumer Sentiment, US S&P/CS Composite-20 HPI, and US Durable Goods Orders all advanced. In Japan, Retail Sales and Household Spending came in better than expected while deflation remains, as shown by the CPI data.
The Gold move above $1,600 seemed short-lived as price took back most of the gains from last week, even moving back to last week’s closing area and moving slightly below its low before ending the week at $1,596. Monday’s $24 drop was too much for the bulls and price merely traded within this range, mostly trading in the lower half portion of this range. This is a minor setback for bulls; they still need to bring price higher and above the $1,620 resistance.
Oil enjoyed another bullish week as it set its 4th weekly bullish close, closing above $97 this time. Bulls drove price higher by nearly $4 as they aim for a break of $98.22 ahead of $100. Given the current price action, it won’t be surprising to see a pullback ahead of the near-term resistance before any eventual upmove.
EURUSD saw another week with a gap down and a weaker close. The pair gapped down slightly on Monday which set the pace for the entire week. More sellers joined the fray when price made a temporarily climb above 1.3000, and this created a 218-pip move on the first day of the week. Price traded lower from then on until reaching a 1.2750 low before a meaningful bounce. Sellers could still be aiming for the 1.2600s before we could see another visit above the 1.3000s. Traders ought to watch the developments in Cyprus.
USDJPY wandered around aimlessly in a 140-pip range this week since price broke down the key 95 level in the prior week. Buyers attempted to breach the 95 level twice this week but they easily failed. This pair should see more action next week with the BOJ rate announcement.
GBPUSD followed through from its impressive recovery the other week, now stalking the key 1.5300 level. The week started pretty rough as the market digested the news about Cyprus bank levies last week. The pair was not spared of this negative development and it ranged for three days before it resumed its climb. With a week high at 1.5245, the pair is just a few pips a way from its near-term target. What’s critical is the bullish momentum as price moves through the 1.5300 level – bulls must make a concerted push higher.
The Week Ahead
Daylight Saving Time shift will happen in Switzerland, the UK, and several Eurozone countries. Meanwhile, New Zealand and Australia will exit DST on April 6 (Saturday) and April 7 (Sunday), respectively.
On Monday, New Zealand, Australia, France, Switzerland, Germany, Italy, and the UK will observe Easter Monday. On Thursday and Friday, China will observe Tomb Sweeping Day.
News-wise, Monday will see the release of Japan’s Tankan Manufacturing and Non-Manufacturing Index, China HSBC Final Manufacturing PMI, US Final Manufacturing PMI, US Construction Spending, and US ISM Manufacturing PMI.
On Tuesday, there are Japan’s Monetary Base, Average Cash Earnings; Australia’s Cash Rate and RBA Rate Statement; Spain Unemployment Change, Germany’s Preliminary CPI, Italy and Spain Manufacturing PMI, Italy Monthly Unemployment Rate, and Euro-area Final Manufacturing PMI; UK Halifax HPI, Net Lending to Individuals, M4 Money Supply, and Manufacturing PMI; US IBD/TIPP Economic Optimism, Factory Orders, and Total Vehicle Sales. FOMC Member Evans will also give a speech.
Wednesday will start off with Australia’s HIA New Home Sales and trade balance, China’s Non-Manufacturing PMI, UK BOE Credit Conditions Survey, UK Construction PMI, Eurozone CPI Flash Estimate, US ADP Non-Farm Employment Change, Crude Oil Inventories, and ISM Non-Manufacturing PMI.
Thursday will get much busier with Australia’s Retail Sales and Building Approvals; Japan’s Overnight Call Rate, BOJ Press Conference, and Monetary Policy Statement; Italy, Spain, and UK Services PMI; Eurozone Final Services PMI and PPI; ECB Rate Announcement and Press Conference; UK Asset Purchase Facility, Bank Rate, and MPC Rate Statement; US Unemployment Claims, and speeches from Fed Chairman Bernanke, and FOMC Member George, Evans, and Yellen.
Finally on Friday, there are economic releases such as BOJ Monthly Report, Switzerland Foreign Currency Reserves, Euro-area Retail Sales, Germany Factory Orders; Canada and US Employment data and Trade Balance, Canada Ivey PMI, and US Average Hourly Earnings.