Volatility remained the order of the week. The Nikkei plunged 6.35 percent on Thursday, sliding to 12,445.38 which is the weakest close since April 3. Japanese officials express that this is just a correction and they are closely watching the action in the stock and currency markets. The decline in Nikkei was followed by Yen strength across the board. In the Japanese data front, Core Machinery Orders declined 8.8 percent in April, a sharp turnaround as it advanced 14.2 percent just last March.
In other news, Reserve Bank of New Zealand decided to leave rates unchanged at 2.50 percent on Thursday. RBNZ subsequently lowered its GDP estimate for March 2014 to 3 percent, slightly lower from the previous estimate of 3.3 percent.
UK Claimant Count Change showed a favorable reading for the fourth straight month, with jobless claims sliding more than expected, -8,600 versus -6,800 expected. Unemployment Rate stood at 7.8 percent, Office for National Statistics said.
Meanwhile, US Unemployment Claims also beat expectations by rising less than expected. Less-than-expected Americans filed their unemployment benefits applications last week, rising 334,000 compared to a median estimate of 354,000. The current figure is the lowest in 5 weeks. US PPI gained 0.5 percent, while University of Michigan’s Preliminary reading for Consumer Sentiment came in slightly lower than expected this June, 82.7 versus 84.9 forecast. On the bright side, this is the second consecutive above-80 reading.
Consolidation continues to persist in Gold, but this time it was confined in a much tighter range below the $1,400 level. Expect further consolidation to happen unless the $1,400 and $1,330 areas break soon.
Oil left Gold in the dust in terms of movement this week as the former successfully completed its second bullish weekly move, closing just above the $98 level this time. This weekly close and consequent weekly high is the highest in 16 weeks, yet oil seems ready to drive higher further. A consolidation could ensue before another move higher. $98.50-$99 would pose as a big test for bulls.
EURUSD tracked higher again this week, following an impressive 350-pip rally during the prior week which breached the 1.3300 level for the first time since late-February. A weekly close above 1.3300 was a significant step achieved by the bulls, and they should maintain a hold of this area in the coming week.
USDJPY continues to suffer from the twin effects of Dollar weakness and Yen strength. Last week’s decline of 570 pips was succeeded this week by an equally-impressive 550-pip weekly plunge, as buyers failed in holding support around the 99 level. A sustained break of 94 would put 90-92.50 in grave danger.
GBPUSD climbed further this week, gaining a modest 240 pips after a spectacular jump of 490 pips last week. The pair has stayed around the 200-day MA so far, yet it seems it is now setting its sight on the 200-weekly MA, sitting around 1.5790. To secure this aim, bulls must be able to defend any attacks on 1.5600.
The Week Ahead
On Monday, New Zealand kicks off the brand new week early with the release of Westpac Consumer Sentiment. This will be followed by Japan’s Tertiary Industry Activity; Australia’s New Motor Vehicle Sales; China’s Foreign Direct Investment; Euro-area and Italian Trade Balance; Canada’s Foreign Securities Purchases; and US Empire State Manufacturing Index. The first of the two-day G8 Meetings starts today.
On Tuesday, a packed news day begins with Reserve Bank of Australia’s release of the Monetary Policy Meeting Minute, succeeded by Japan’s Industrial Production (revised); UK’s CPI, RPI, HPI, and PPI, as well as the BOE Inflation Letter and Inflation Report Hearings; Germany and Euro-area ZEW Economic Sentiment; US CPI, Housing Starts, and Building Permits.
Wednesday is brief but relatively packed with news, starting off with New Zealand’s Current Account; Japan’s Trade Balance; Australia’s CB and MI Leading Index; UK MPC Meeting Minutes; Switzerland’s ZEW Economic Expectations; Canada’s Wholesale Sales. BOC’s Governor Poloz will also give a speech followed by FOMC Economic Projections, Federal Funds Rate Announcement and FOMC Statement and Press Conference.
Thursday gets very busy with a raft of economic releases, starting with New Zealand’s GDP; China’s HSBC Flash Manufacturing PMI; SNB’s Financial Stability Report, Rate Announcement and Press Conference; Germany’s PPI; US, Germany, Euro-area, and France Flash Manufacturing PMI; US Unemployment Claims, Philly Fed Manufacturing Index, and Existing Home Sales. Eurogroup meetings will also be held today.
Friday closes the week with BOJ Kuroda’s speech; Euro-area Current Account; UK Public Sector Net Borrowing; Canada CPI and Retail Sales. ECOFIN meetings will be held today.