The Swiss National Bank surprised the market as it decided to remove the EURCHF cap for the first time in over three years. Funds and brokers were caught on the wrong side of the market, causing some of them to shut down due to bankruptcy. FXCM, the largest US retail FX broker, suffered massive capital hit but Leucadia National came in to its rescue with capital infusion. The market carnage is still fresh, so it may take time before the dust settles. The SNB also slashed Libor rate to negative 0.75 percent from negative 0.25 percent.
In terms of PMI data, the US and UK posted weak readings. UK Construction PMI was slightly weaker at 57.6 while Services PMI was much weaker at 55.8. Meanwhile, US ISM Non-Manufacturing PMI was weak at 56.2 Canada led the pack with a better-than-expected Ivey PMI of 55.4.
In the United States, the latest report from the Department of Labor showed the Jobless Claims for the prior week rose to 316,000, the highest reading since the early part of September. Empire State Manufacturing Index advanced to 10.0 this January, after suffering a -3.6 reading in December. Meanwhile, Philly Fed Manufacturing Index plunged to 6.2, its lowest level since February.
Gold pushed northward further this week with close to $65 advance, putting it close to the $1,300 even more. Tougher resistance is found around $1,350. We may have just seen the bulls set the tone for the entire month.
Finally, we have seen some respite for bulls as Oil has closed virtually unchanged this week following a drop to as low as $44. Buyers should take advantage of this situation by pushing price toward $55-$60 as soon as possible.
EURUSD declined for the sixth straight week on the back of the removal of the EURCHF cap. The pair dropped a little over 400 pips and it is slowly closing in on the 1.1000 level. Buyers need to bring price back toward 1.2000.
USDJPY eased again this week as buyers failed to take out the 118 level for the second week. Further selling could pull this pair toward 114-115 in the next 1-3 weeks.
GBPUSD declined for six straight weeks as well. However, unlike EURUSD, Cable put up an inside bar this week and closed in the mid-1.51s. With Dollar strength intact, this pair is still on its way to ward 1.48 to 1.50.
The Week Ahead
Monday will be very quiet except for a few news releases, particularly Australia’s New Motor Vehicle Sales; Switzerland’s PPI; Germany’s Bundesbank Monthly Report; and Canada’s Foreign Securities Purchases. The US will be on holiday to celebrate Martin Luther King Day.
Tuesday will start early with New Zealand’s NZIER Business Confidence; China’s GDP, Fixed Asset Investment, Industrial Production, and NBS Press Con; Germany’s ZEW Economic Sentiment; US NAHB Housing Market Index; and Canada’s Manufacturing Sales.
Wednesday will start early again with New Zealand’s CPI; Australia’s Westpac Consumer Sentiment; BOJ’s Monetary Policy Statement and Press Con; UK Claimant Count Change, Unemployment Rate, Average Earnings Index, MPC Asset Purchase Facility and Official Bank Rate Votes. This will be followed by Canada’s Wholesale Sales, Bank of Canada Overnight Rate Announcement, Rate Statement, Press Conference, and Monetary Policy Report; and US Housing Starts and Building Permits. Today is also day 1 of the 4-day World Economic Forum annual meetings
Thursday will be just as busy with Business NZ Manufacturing Index; Australia’s MI inflation Expectations; Spain’s Unemployment Rate; UK Public Sector Net Borrowing and CBI Industrial Order Expectations; ECB Rate Announcement and Press Con; US Jobless Claims.
Friday will still be active with China’s HSBC Flash Manufacturing PMI; Euro-area, France, and Germany Flash Manufacturing PMI and Services PMI; UK and Canada Retail Sales; Canada CPI; US Flash Manufacturing PMI and Existing Home Sales.
On Sunday, Greece will hold its much-anticipated Parliamentary Election.