Bernanke testified on the Semiannual Monetary Policy Report before the House Financial Services Committee and the Senate Banking Committee on Wednesday and Thursday, respectively. The central theme of his fairly dovish testimony was that the pace of bond purchases does not move on a preset course, and “highly accommodative policy is appropriate for the foreseeable future.” He expressed that the stimulus could cease around this time in the subsequent year assuming that the economy advances as expected.
In other news, the United States Empire State Manufacturing Index jumped to 9.5 in July, while the US Philly Fed Manufacturing Index also did very well and surged to 19.8.
Bank of England’s Monetary Policy Committee voted 9-0-0 in favor of keeping the Official Bank Rate at 0.50 percent and Asset Purchase Facility at GBP375 billion. Meanwhile, UK Claimant Count Change fell by 21,200 in June, a three-year high.
Bank of Canada on Wednesday maintained its overnight rate target at 1 percent, with the Bank Rate at 1.25 percent and the deposit rate at 0.75 percent, respectively.
Gold went up despite the very tight trading range encountered this week. The $1,300 level continued to suppress bullish enthusiasm but the downside was easily capped at $1,270. Bulls should ensure a strong push higher next week; otherwise, bears would seize any opportunity to sink price back through the $1,200 level.
Another solid trading week transpired in oil as price reached for its third fresh weekly highs, this time rising through the $108 level. Additional bullish support should come in around $105-$107 to prop up price further into the new week and through the coming new month.
It was a tough week for EURUSD as the pair moved around a tight range, trading very close to the 200-day MA all throughout the week. The pair managed to trade mostly above the 1.3100 level. Bernanke’s testimony didn’t ruffle too many feathers and the pair could see a continuation of the climb next week. For that to happen, bulls must conquer 1.3200 convincingly, ideally before mid-week.
USDJPY bulls attempted to take out the 100.00-50 area for nearly two weeks and they succeeded this time. However, the advance has not been easy for buyers, and so they are still expected to gather enough support to push for a key break of 101.50 in the coming week.
GBPUSD beat EURUSD this week as the former was able to form a higher weekly high and close, breaking through the 1.5200 level at the same time. If the pair successfully pushes above 1.5300, not much is expected to be in the way towards the 200-day MA around 1.5588.
The Week Ahead
Monday is all quiet except for the release of the US Existing Home Sales data.
Tuesday is a little bit more active with UK’s BBA Mortgage Approvals; Canada’s Retail Sales; US HPI and Richmond Manufacturing Index; Eurozone Consumer Confidence.
Wednesday sees the release of New Zealand and Japan Trade Balance; Australia CPI; China’s HSBC Flash Manufacturing PMI; France, Germany, and Eurozone Flash Manufacturing and Services PMI; UK CBI Industrial Order Expectations; US Flash Manufacturing PMI and New Home Sales.
On Thursday, New Zealand’s central bank will announce its rates. This will be followed in the afternoon by Spain’s Unemployment Rate; Germany’s Ifo Business Climate; Eurozone M3 Money Supply; UK Preliminary GDP; US Unemployment Claims and Durable Goods Orders.
Friday quiets down significantly, with only Tokyo Core CPI, Germany’s Import Prices, and US Revised UoM Consumer Sentiment.