The Bank of Canada has decided to keep its overnight rate unchanged at 1 percent. Accordingly, the deposit rate is set at 0.75 percent while the bank rate is at 1.25 percent. The Bank has noted that CPI and core CPI have moved up in recent months, and they attributed it to temporary effects rather than domestic factors. Inflation is projected to stay near 2 percent in the following two years.
Meanwhile, the US published a mixed bag of data this week. Both July readings of the Empire State Manufacturing Index and Philly Fed Manufacturing Index surged (25.6 and 23.9, respectively), but Housing Starts and Building Permits came in lower than expected (0.89 million and 0.96 million, respectively). Jobless Claims for the prior week came in lower than expected for a second week in a row at just 302,000. On the other hand, TIC Long-Term Purchases increased in May to a lower-than-expected $19.4 billion, following a revised lower reading for April (-$41.2 billion).
In other news, UK Claimant Count Change came in much better than expected in June (-36,300 versus -27.100 expected). Meanwhile, the May Jobless rate, as expected, registered a slight dip to 6.5 percent from 6.6 percent.
We finally saw good resistance in Gold as price posted its first weekly loss in seven weeks. Although price declined, bulls were able to hold on to the $1,300 level, and this could indicate that they are still in control. They need another push toward $1,400 to avoid a move back close to $1,250.
Oil moved opposite of Gold, as the former made a substantial reversal this week off of the critical $99-$100 area. From peeking transiently below $99, price zoomed up close to $104, before closing the week below $103. This move has essentially negated the risk for further declines, but bulls should stay focused so as not to waste the current opportunity to bring price back above $105.
The risk of EURUSD visiting 1.3500 has been materialized this week as bulls failed to take out resistance around 1.3650. Current price action opens up to a move toward 1.3300-50 in the next two weeks. What can turn this around is a strong weekly close above 1.3550-1.3600 at the very least.
GBPUSD buyers attempted to create a bullish weekly close, but selling overwhelmed their efforts as the week drew to a close. The 1.7100 continues to attract a tug-of-war for the control of the remaining part of July. Bulls should gun for another run toward 1.7200, unless they want an increased pressure on 1.7000.
USDJPY traded this week with just a 70-pip trading range; however sellers have stayed dominant throughout the process. We could be seeing a setup for a large move down, unless buyers have a different idea in mind. Bulls should not waste time; they must gain a foothold above 103 as soon as possible.
The Week Ahead
Monday will mostly be quiet except for the release of Germany’s Bundesbank Monthly Report. Japanese banks will observe Marine Day.
Activity will pick up slightly on Tuesday starting with RBA Governor Stevens’ speech. This will be followed by Switzerland’s Trade Balance; UK Public Sector Net Borrowing and CBI Industrial Order Expectations; US CPI and Existing Home Sales.
Wednesday’s news activity will be a notch higher with Australia’s CPI; UK MPC Asset Purchase and Official Bank Rate votes, BBA Mortgage Approvals, and CBI Realized Sales; Canada’s Retail Sales; and Eurozone Consumer Confidence.
Thursday will register the most news activity starting very early with New Zealand’s RBNZ Rate Announcement and Statement, and Trade Balance; Japan’s Trade Balance; China’s HSBC Flash Manufacturing PMI; France, Germany, and Eurozone Flash Manufacturing and Services PMI; UK Retail Sales; US Flash Manufacturing PMI and New Home Sales.
Friday ends the week with Japan’s Tokyo Core CPI; New Zealand’s ANZ Business Confidence; Germany’s GfK Consumer Climate and Ifo Business Climate; Eurozone Private Loans and M3 Money Supply; UK Prelim GDP; and US Durable Goods Orders.