The latest news from Japan showed Household Spending and Preliminary Industrial Production posted more weakness than analysts expected. Household spending dipped 4.6 percent (compared to a forecast of -3.4 percent), while Preliminary Industrial Production slipped 2.5 percent after gaining 0.7 percent in the prior month. These weaknesses come right after the previous month’s sales tax hike issued by the government, and raise some critical questions about the current economic recovery.
In other news, France’s Consumer Spending unexpectedly slipped 0.3 percent in April, while Germany’s Unemployment Change came in more than expected at 24,000. Australia’s Construction Work Done improved in the March quarter, but Private Capital Expenditure dipped much more than anticipated.
In the United States, Jobless Claims for the prior week increased less than anticipated (300,000 versus 321,000 forecast). Pending Home Sales rose less than expected, but Durable Goods Orders, S&P/CS Composite-20 HPI, Flash Services PMI all came in better than forecast. Chicago Purchasing Managers’ Index moved up to 65.5 in May, the highest level reached since October, thanks to improved demand.
We finally saw Gold break its consolidation which has stood for more than five weeks. Gold dived through stops below the $1,300 level and closed below $1,250 on Friday. Next week, it will be the buyers’ turn to prove whether they can also control price and make a recovery back through $1,300.
After two impressive weekly advances, Oil posted an inside week and decline back below the $103 level. Bulls should try again to close above $104 next week. Otherwise, sellers would try to push price toward $99 again.
After three weeks of decline, EURUSD bulls could only muster a very marginal weekly bullish advance with just over 80 pips of trading range. This indicates there isn’t a lot of participation from a considerable number of bulls. They should do more next week and attempt a move back through 1.3800. If not, we would see 1.3400 again.
GBPUSD fared worse than EURUSD this week, as the former’s near-120 pip decline on Wednesday served a technical blow to the aching bulls. Bears might take a much longer glimpse at the 1.6600s next week. A move back above 1.6900-50 would negate the recent bearish momentum, though.
No follow-through move has been seen so far after USDJPY posted its first bullish weekly close last week. Sellers camped around 102 easily thwarted bulls throughout the week, but we have seen some buying in the low-101s as well. We could see another confrontation at the 102 level next week.
The Week Ahead
Monday will be more active than usual with news releases such as Japan’s Capital Spending; Australia’s Building Approvals and Company Operating Profits; Germany’s Prelim CPI; Spain, Italy, Switzerland, and UK Manufacturing PMI; UK Net Lending to Individuals; and US ISM Manufacturing PMI.
Tuesday will start early with New Zealand’s Overseas Trade Index; China’s Non-Manufacturing PMI; Australia’s Retail Sales, Current Account, Cash Rate Announcement and Rate Statement; Japan’s Average Cash Earnings; UK Nationwide HPI and Construction PMI; Eurozone CPI Flash Estimate and Unemployment Rate; and US Factory Orders.
Wednesday will stay busy with Australia’s GDP; Spain, UK, and Italy Services PMI; G7 Meetings; US ADP Non-Farm Employment Change; US and Canada Trade Balance; US Ism Non-Manufacturing PMI; BOC Rate Statement and Announcement.
Thursday will offer more central bank action via ECB and BOE rate announcements and statements, along with other news particularly Australia’s Trade Balance; China’s HSBC Services PMI; Eurozone Retail Sales; G7 Meetings; Canada’s Building Permits and Ivey PMI; and US Jobless Claims.
Friday’s activity will decline significantly, but traders will surely monitor news such as German Trade Balance; Switzerland’s Foreign Currency Reserves and CPI; UK Trade Balance; Canada and US jobs data.