The better-than-expected readings from US June CB Consumer Confidence and May New Home Sales released on Tuesday were quickly overshadowed by the simultaneous Wednesday release of the Final GDP and Durable Goods Orders. The Bureau of Economic Analysis reported that Final GDP shrank 2.9 percent during the first quarter of this year, its biggest decline since the early part of 2009 or the period when the Great Recession was cooling down. The Census Bureau said Durable Goods Orders surprised with a 1 percent decline in May, while Core Durable Goods Orders slid by a marginal 0.1 percent following a 0.3 percent gain in April. Durable goods orders, particularly for machinery, computers and electronic products, appliances and components, transportation, electrical equipment, and defense capital goods fell on weaker demand.
Meanwhile, Japan’s statistics bureau said May consumer prices jumped 3.4 percent in May, marking its fastest advance in 32 years, as an effect of higher sales tax as well as utility charges. This squeezed consumers’ budgets and household spending slumped 8 percent, following a 4.6 percent decline in the previous month.
In other news, China Flash Manufacturing PMI came in better than expected and above the 50 level. On the other hand, Flash Manufacturing PMI and Flash Services PMI for Germany, France, and Eurozone came in weaker than expected. US Flash Manufacturing and Services PMI also showed better-than-expected readings.
Like Oil, Gold struggled to push northward last week and keep the momentum on the bulls’ side. However, unlike Oil, Gold was able to make a very marginal bullish weekly close just above the $1,300 level. Gold bulls must try another push toward $1,350 and the critical $1,400. Support is expected to come in around $1,250-80.
Oil bulls tried to test the bearish stronghold right at the $107 level last week, but they were quickly negated by the opposing forces. Overall, price struggled to move northward as expected and traded most of the week within the prior week’s trading range. The bearish weekly close could be a sign that bulls are not strong enough to push price higher, so we could see more zigzagging action around the current price levels next week.
After the nerve-wrecking past few weeks, EURUSD has managed to pull off its second straight bullish weekly close just ahead of the ECB Rate Announcement in this coming week. Buyers need to concentrate on a collective push through 1.3800 and toward the resistance highs just ahead of 1.4000. They cannot afford a weekly bearish close towards 1.3500 in the coming week.
GBPUSD fared better than its rival EURUSD as the former clinched its fourth consecutive bullish weekly close this week. The inside week received subdued activity around the new highs, though. Bulls must continue to keep their foothold of the 1.7000.
If we would stop for a while and consider the prior week as a bearish week (since it was barely a bullish weekly close anyway), USDJPY has hit its third consecutive bearish weekly close and it is in critical danger of making a solid push toward multi-month lows. The $100-$101 area is a must-hold for bulls to thwart off this extremely serious threat.
The Week Ahead
Monday’s news activity will kick off early starting with New Zealand’s Building Consents. This will be followed by Japan’s Prelim Industrial Production; Australia’s HIA New Home Sales and MI Inflation Gauge; Germany’s Retail Sales; Eurozone M3 Money Supply, CPI Flash Estimate, and Private Loans; UK Net Lending to Individuals; Canada’s GDP; US Chicago PMI and Pending Home Sales.
On Tuesday, news activity will start quite early as well with Japan’s Tankan indices and Average Cash Earnings; China’s Manufacturing PMI and HSBC Manufacturing PMI; RBA Rate Announcement and Statement; Spain, Italy and Eurozone Manufacturing PMI; Swiss SVME PMI; Germany’s Unemployment Change; UK Manufacturing PMI; and US ISM Manufacturing PMI. Canadian banks will be close to observe Canada Day.
Wednesday will be shorter than usual with Australia’s Trade Balance; UK Nationwide HPI and Construction PMI; Spain’s Unemployment Change; US ADP Non-Farm Employment Change, Factory Orders, and Fed Yellen’s speech.
News activity will pick up on Thursday with China’s Non-Manufacturing PMI and HSBC Services PMI; Australia’s Building Approvals and Retail Sales; Italy, UK and Spain Services PMI; ECB Minimum Bid Rate Announcement and Presscon; Canada’s Trade Balance; US Trade Balance, Jobless Claims, Jobless Rate and ISM Non-Manufacturing PMI.
Friday ends the week with a much abbreviated news session with only RBA Assistant Governor Edey’s speech; Germany’s Factory Orders; and UK Halifax PMI.