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Bernanke Perpetuates the QE-Taper Guessing Game

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.

Commodities

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.

Currencies

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.

Dollar Slumps as US FOMC Minutes Create Confusion

The latest US Federal Open Market Committee Meeting Minutes published on Wednesday revealed that there is no urgent need to end the $85 billion monthly bond-buying program, based on the information acquired since May. The minutes noted moderate economic activity coupled with improvement in the labor and housing market while unemployment rate stayed elevated. About half of the policy board prefers to end the stimulus program by year-end, but many of them concede that labor market improvement is warranted before tapering the stimulus.

In other news, China’s Producer Price Index slumped 2.7 percent and has stayed subdued since March 2012. On the other hand, Consumer Price Index surprised to the upside with a 2.7 percent gain, the fastest pace in four months.

Australia’s Employment Change data saw a gain of 10,300 locals employed in June, way better than the nearly flat forecast by analysts surveyed. Unemployment Rate ticked up to 5.7 percent in June, the highest since October 2009.

 Commodities

Gold’s new trading week started out quiet but the pace picked up on Thursday after the US FOMC Meeting Minutes. The volatility enabled gold to climb just two pips short of $1,300 and close the week around $1,285. Gold is now ready to step up the pace and aim for $1,350-$1,400.

It was a solid trading week for Oil bulls as price thrusted further up and closed the week at the $105.50s. However the run-up seems overdone and price is vulnerable to quick declines. Bulls should support price around $102-$104 to keep the momentum going.

 Currencies

EURUSD buyers launched a significant effort this week, breaking the three consecutive weekly declining streak and averting a potential black hole below the 1.2800 area. The volatility caused by the US FOMC Meeting Minutes and Bernanke’s speech helped the pair spike through 1.3200 before ending the week around 1.3066. Upside target right now is the strong break of 1.3400.

USDJPY manifested some weakness this week after what was pretty much a one-way street since mid-June. The 101.50 level posed some problems and price turned around from this area, sinking quickly below 100. Sellers will have to chop their way through 97-98 in order to reach 94-95.

GBPUSD finally traded in the green this week after registering three straight weekly drops that saw price nearly touch the 1.4800 critical level. The pair managed to close above 1.5100; however a break of 1.5300 is needed to keep the momentum on the side of the bulls.

 The Week Ahead

The coming week will be quite active with Tuesday and Wednesday posting the greatest activities.

Monday’s Asian session comes out with its first release in the form of Australia’s New Motor Vehicle Sales, followed by China’s Fixed Asset Investment, GDP, Industrial Production, Retail Sales and NBS presscon; Switzerland’s PPI; US Retail Sales, Empire State Manufacturing Index, Business Inventories. Japan will observe Marine Day this day.

On Tuesday, New Zealand will start off with the release of CPI, then Australia’s Monetary Policy Meeting Minutes; UK PPI Input, RPI, HPI, and CPI, and BOE Inflation Letter; Germany’s ZEW Economic Sentiment; Eurozone CPI, ZEW Economic Sentiment, and Trade Balance; Canada’s Manufacturing Sales; US CPI, Capacity Utilization Rate, Industrial Production, and TIC Long-Term Purchases.

Wednesday starts off early with Japan’s BOJ Monetary Policy Meeting Minutes; UK Claimant Count Change, MPC Official Bank Rate Votes, MPC Asset Purchase Facility Votes, Average Earnings Index, Unemployment Rate; Switzerland ZEW Economic Expectations; Canada’s Foreign Securities Purchases, BOC Rate Statement and Announcement; US Housing Starts, Building Permits, Beige Book, and Fed. Reserve Chairman Bernanke’s Testimony.

Thursday will begin with Australia’s CB Leading Index and NAB Quarterly Business Confidence; Eurozone Current Account; UK Retail Sales; Canada Wholesale Sales; US Unemployment Claims, CB Leading Index, and Fed. Chairman Bernanke’s Testimony.

Friday quiets down significantly and will only see the release of Germany’s PPI, Spain’s HPI, and Canada’s CPI. Today will also be the first day of the two-day G20 meetings.

Central Banks Kept Rates Unchanged, Dollar Strength Resumes

Central bank rate announcements and the widely-popular US employment data were the focus for the past week.

The European Central Bank and the Bank of England both left their respective rates unchanged. Both BOE and the ECB kept the rates at 0.50 percent. The Asset Purchase Facility created and utilized by the BOE remained at GBP375 billion.

The Australian central bank, RBA, declared an unchanged cash rate on Wednesday. Reserve Bank of Australia left the rate at the ultra-low 2.75 percent as the policymakers pointed to signs of pickup in the local housing market and consolation for local exporters as the Aussie dollar weakened against other currencies, particularly the US dollar, precipitated by the rate slashes that began sometime in the latter part of 2011. The consensus from the board, led by Governor Stevens, is an outlook for improvement in the following year joined by depreciation of the Australian dollar “over time.” Stevens believes the local currency remains “at a high level.”

Australian Bureau of Statistics published a 0.1 percent increase in Retail sales in May and a better-than-expected Trade Balance for May, AUD0.67 billion.

In other news, Automatic Data Processing reported on Wednesday a better-than-forecast 188,000 climb in June’s US ADP Non-Farm Employment Change. Median expectation was for a climb of 161,000, subsequent to May’s 134,000 gain. On Friday, the US dollar caught a second wind as the Non-Farm Employment Change data from the Bureau of Labor Statistics revealed an even stronger 195,000 reading. Unemployment rate stood at 7.6 percent in June.

Commodities

Gold had a very quiet trading during the first four days of the week. But this all changed on Friday as the yellow metal burst downward after the $1,250-60 area failed to give way to the ailing bulls. The week closed down and inside the prior week’s much larger range. The $1,180-$1,200 area is back in trouble.

Currencies

EURUSD sellers encountered relatively weaker resistance as they moved further down since the 1.3100 level broke the other week. Since 1.2900 and 1.3000 psychological level was also left in the dust, the next target is the break of 1.2700-1.2800.

With the benefit of Dollar strength, USDJPY was able to rise this week, climbing in 4 out of the 5 trading days. The weekly close above the 101 level is an indication for a possible return to the upper-103s. In the interim, the 100 level must hold.

Just like EURUSD, GBPUSD declined heavily this week, sinking nearly 450 pips after 1.5300 held well and the 1.5000 along with the 1.4900 level got pulverized. If 1.4800 yields to pressure, sellers will set their sights on 1.4100-1.4200.

The Week Ahead

This coming week, economic data are pretty much evenly spread out but generally, it will be much quieter compared to the prior week.

On Monday, there will be releases such as Japan’s Current Account, AUD ANZ Job Advertisements; Germany’s Trade Balance and Industrial Production; Canada’s Building Permits and Bank of Canada’s Business Outlook Survey.

Tuesday starts very early with the release of New Zealand’s NZIER Business Confidence; followed by UK’s BRC Retail Sales Monitor, Australia’s NAB Business Confidence; China’s CPI; Switzerland’s Retail Sales; UK’s Manufacturing Production and Trade Balance; and ECOFIN Meetings.

On Wednesday, traders can expect some action during the release of Australia’s Westpac Consumer Sentiment; China’s Trade Balance; France’s Industrial Production; FOMC Meeting Minutes and US Federal Reserve Chairman Bernanke’s speech.

On Thursday, Japan’s comes out with Core Machinery Orders, followed by Australia’s MI Inflation Expectations, Employment Change, and Unemployment Rate; BOJ Monetary Policy Statement and BOJ Press conference; ECB Monthly Bulletin; United States Unemployment Claims and Federal Budget Balance.

Friday ends the week with the release of Australia’s Home Loans; Eurozone Industrial Production; US PPI and Preliminary UoM Consumer Sentiment.

Slew of Favorable US Data Continues while the USD Strengthens

It was another favorable week for the United States with the release of several forecast-beating economic data.

The US Census Bureau announced that the Durable Goods Orders increased 3.6 percent in May, led by demand for trucks and cars, while Core Durable Goods Orders inched up 0.7 percent.

The Standard & Poor’s/Case-Shiller Composite-20 House Price Index rose by most in the last seven years to 12.1 percent in April, beating the median forecast of 10.6 percent. The current reading is the eleventh straight monthly climb.

The Consumer Confidence report showed an advance to 81.4 in June, stronger than the 75.2 estimate. This was a huge jump from the previous revised reading of 74.3 (down from the initial reading of 76.2).

The US New Home Sales also increased in May to 476,000, beating its respective forecast for the second straight month. Sales have now been maintained in the 400,000 level for the fifth straight month.

The University of Michigan Consumer Sentiment capped the week with an 84.1 reading for June, keeping the sentiment index in the 80 level for the second month.

Meanwhile, the notable weak US data results came from Final GDP and Chicago PMI. Both came in weaker than expected at 1.8 percent and 51.6, respectively.

In other news, Statistics New Zealand reported a growth of NZD41 million in Overseas Merchandise Trade—the weakest gain in four months. Exports slid 7.8 percent, led by the 48 percent export decline of crude oil. Analysts were expecting an NZD412 million advance.

In Japan, Preliminary Industrial Production surprised with a 2 percent gain in May, a METI report showed last Friday. The fifth consecutive monthly gain came as a surprise since analysts were expecting a mere 0.2 percent advance after a substantial 1.7 percent growth in April. Retail Sales edged up 0.8 percent in April, following a -0.2 percent reading back in March and three more monthly declines. Housing starts jumped 14.5 percent.

Commodities

Gold declined significantly for another week, sinking $121 this time ($122 last week). After moving down to $1,1180, price made a quick up burst during the final two hours on Friday, climbing $47 to create this week’s only positive daily close at $1,233—near the midpoint of this week’s decline. Bulls should consolidate their efforts for a very quick move toward $1,400 this coming week.

Oil moved opposite to Gold for the entire week. On Friday, the climb above the $97 level lost support, pulling price back to the $96s where it ended during the Friday close. Nevertheless, it was an up week for Oil and another test of $97-$99 could happen again in the subsequent days.

Currencies

EURUSD made a follow-through decline this week after registering a 315-pip bearish engulfing candlestick in the previous week. The 1.3000 level is in very serious danger of getting blown out in the coming week. Bulls must fortify their defenses at the said level.

USDJPY made an impressive, albeit slow, recovery since June 17, printing positive closes in 8 of the last 10 trading days. The pair comfortably closed above 99 on Friday, and this sets up a possible march toward the 100-101 area in the coming weeks. Buyers must remain supportive of any price declines.

Except for Monday, GBPUSD bears trashed a lot of bulls throughout this week, sinking price through the 1.5200 level before closing the week slightly above this level. Based on the current price action, the pair is poised to make another attack on the 1.5000-1.5150 area. Buyers should vehemently oppose further declines in the new week.

 The Week Ahead

The coming week is the start of a new month; hence it will be evenly lively with a slew of economic data releases.

Monday features the release of Japan’s Tankan data; China, Italy, Spain, and the UK Manufacturing PMI and Swןtzerland PMI; Eurozone PMI, Unemployment Rate, and CPI Flash Estimate; and US ISM Manufacturing PMI.

On Tuesday, there are Japan’s Average Cash Earnings; RBA Rate Announcement and RBA Rate Statement; UK Construction PMI; and US Factory Orders.

Wednesday sees the release of Australia’s Trade Balance and Retail Sales; Eurozone, UK, Italy, and Spain Services PMI; Eurozone Retail Sales; Canada and US Trade Balance; US Unemployment Claims, ADP Employment data, and ISM Non-Manufacturing PMI.

Thursday features the release of Australia’s Building Approvals; UK Asset Purchase Facility; BOE and ECB Rate Announcement and Statement.

Finally on Friday, the market will witness the release of Switzerland’s CPI; German Factory Orders; Canada Ivey PMI; and US and Canada Employment Data.

Bank of England Votes for Status Quo while the US Fed Favors Tapering

Federal Reserve Chairman Ben Bernanke announced during the latest FOMC press conference held on Wednesday that the Fed is looking into initiating the unwinding of its $85 billion monthly bond-buying scheme towards the end of the current year.

According to the Federal Open Market Committee, positive developments have been noted in the housing and labor market, including household spending as well as business fixed investment. At the same time, FOMC concurred that the jobless rate remains elevated, although they expect it to taper off later on. Some analysts are now projecting a $20 billion cut in the QE by the third or fourth quarter of this year.

The US Federal Funds Rate was also announced it was maintained at less than 0.25 percent. Philly Fed Manufacturing index surprised the market with an advance of 12.5, following Monday’s equally-surprising Empire State Manufacturing Index reading which stood at 7.8. US CPI remained low at 0.1 percent.

In the UK, Bank of England’s Monetary Policy Committee, for the fifth time, voted 3-0-6, comprising of 3 votes to increase asset purchases and 6 votes to maintain asset purchases at GBP375 billion (or $587 billion). BOE Governor King, along with Fisher and Miles, voted for an increase in the asset purchase, and lost to the majority which expects the economic recovery and that it is “becoming more established.” The MPC also voted 9-0 to maintain rates at 0.50 percent. King will be replaced by ex-Bank of Canada chief Carney this month.

Meanwhile, UK Public Sector Net Borrowing rose less than expected to GBP10.5 billion, thanks to windfall tax payments by Swiss banks. UK Retail Sales in May jumped 2.1 percent, a huge turnaround from the prior month’s -1.1 percent reading.

Commodities

Lack of bullish interest in Gold to thrust through the $1,400 level paved the way to a strong decline this week. Strong selling saw a $120 decline towards fresh lows—levels unseen since September 2010. Gold must make a quick recovery back to $1,400, else bearish momentum would pick up further.

Oil plunged a little over $6 in just three days, after the $99 level failed to gain support from the bulls as pointed out last week. Majority of the fall happened on Thursday and Friday, after several levels, from $98 down to $94, crumbled due to heavy selling pressure. If further selling goes on, a break of $91 would expose $85-$89.

Currencies

EURUSD tumbled during the last three days of this week, after 1.3300 failed to hold on Wednesday and Thursday. It would be interesting to see whether bulls can make up for lost time and prices. 1.3000-1.3100 is the key area to watch.

USDJPY buyers did a spectacular job this week, printing five straight bullish days and recovering most of the prior week’s 550-pip decline. It was an impressive feat and it would be equally fascinating to see whether they could keep up the momentum this coming week. 99-101 is the near-term big barrier.

Except for Thursday, it was a one-way direction for GBPUSD this week, after the very fleeting trip above the 200-day MA around 1.5700. 1.5400 should hold this week to prevent an attack on 1.5100-1.5200.

The Week Ahead

Monday will be very quiet, with only Germany’s Ifo Business Climate coming out as the key economic release.

The pace picks up slightly on Tuesday with the release of UK BBA Mortgage Approvals, UK Inflation Report Hearings; US Durable Goods Orders, S&P/CS Composite-20 HPI, CB Consumer Confidence, and New Home Sales.

On Wednesday, there are GfK German Consumer Climate; UK BOE Financial Stability Report and CBI Realized sales; US Final GDP.

Thursday will be the busiest of the week with the release of New Zealand Trade Balance, ANZ Business Confidence; German Unemployment Change; Euro-area M3 Money Supply; UK Final GDP and Current Account; US Personal Spending and Income, Core PCE Price Index, Pending Home Sales, and Unemployment Claims.

Friday will be relatively busy with Japan’s Tokyo Core CPI; UK Nationwide HPl German Retail Sales; French Consumer Spending; Canada’s GDP; and US revised UoM Consumer Sentiment and Chicago PMI.

Volatility Led by Yen, Nikkei Continues

Volatility remained the order of the week. The Nikkei plunged 6.35 percent on Thursday, sliding to 12,445.38 which is the weakest close since April 3. Japanese officials express that this is just a correction and they are closely watching the action in the stock and currency markets. The decline in Nikkei was followed by Yen strength across the board. In the Japanese data front, Core Machinery Orders declined 8.8 percent in April, a sharp turnaround as it advanced 14.2 percent just last March.

In other news, Reserve Bank of New Zealand decided to leave rates unchanged at 2.50 percent on Thursday. RBNZ subsequently lowered its GDP estimate for March 2014 to 3 percent, slightly lower from the previous estimate of 3.3 percent.

UK Claimant Count Change showed a favorable reading for the fourth straight month, with jobless claims sliding more than expected, -8,600 versus -6,800 expected. Unemployment Rate stood at 7.8 percent, Office for National Statistics said.

Meanwhile, US Unemployment Claims also beat expectations by rising less than expected. Less-than-expected Americans filed their unemployment benefits applications last week, rising 334,000 compared to a median estimate of 354,000. The current figure is the lowest in 5 weeks. US PPI gained 0.5 percent, while University of Michigan’s Preliminary reading for Consumer Sentiment came in slightly lower than expected this June, 82.7 versus 84.9 forecast. On the bright side, this is the second consecutive above-80 reading.

Commodities

Consolidation continues to persist in Gold, but this time it was confined in a much tighter range below the $1,400 level. Expect further consolidation to happen unless the $1,400 and $1,330 areas break soon.

Oil left Gold in the dust in terms of movement this week as the former successfully completed its second bullish weekly move, closing just above the $98 level this time. This weekly close and consequent weekly high is the highest in 16 weeks, yet oil seems ready to drive higher further. A consolidation could ensue before another move higher. $98.50-$99 would pose as a big test for bulls.

Currencies

EURUSD tracked higher again this week, following an impressive 350-pip rally during the prior week which breached the 1.3300 level for the first time since late-February. A weekly close above 1.3300 was a significant step achieved by the bulls, and they should maintain a hold of this area in the coming week.

USDJPY continues to suffer from the twin effects of Dollar weakness and Yen strength. Last week’s decline of 570 pips was succeeded this week by an equally-impressive 550-pip weekly plunge, as buyers failed in holding support around the 99 level. A sustained break of 94 would put 90-92.50 in grave danger.

GBPUSD climbed further this week, gaining a modest 240 pips after a spectacular jump of 490 pips last week. The pair has stayed around the 200-day MA so far, yet it seems it is now setting its sight on the 200-weekly MA, sitting around 1.5790. To secure this aim, bulls must be able to defend any attacks on 1.5600.

The Week Ahead

On Monday, New Zealand kicks off the brand new week early with the release of Westpac Consumer Sentiment. This will be followed by Japan’s Tertiary Industry Activity; Australia’s New Motor Vehicle Sales; China’s Foreign Direct Investment; Euro-area and Italian Trade Balance; Canada’s Foreign Securities Purchases; and US Empire State Manufacturing Index. The first of the two-day G8 Meetings starts today.

On Tuesday, a packed news day begins with Reserve Bank of Australia’s release of the Monetary Policy Meeting Minute, succeeded by Japan’s Industrial Production (revised); UK’s CPI, RPI, HPI, and PPI, as well as the BOE Inflation Letter and Inflation Report Hearings; Germany and Euro-area ZEW Economic Sentiment; US CPI, Housing Starts, and Building Permits.

Wednesday is brief but relatively packed with news, starting off with New Zealand’s Current Account; Japan’s Trade Balance; Australia’s CB and MI Leading Index; UK MPC Meeting Minutes; Switzerland’s ZEW Economic Expectations; Canada’s Wholesale Sales. BOC’s Governor Poloz will also give a speech followed by FOMC Economic Projections, Federal Funds Rate Announcement and FOMC Statement and Press Conference.

Thursday gets very busy with a raft of economic releases, starting with New Zealand’s GDP; China’s HSBC Flash Manufacturing PMI; SNB’s Financial Stability Report, Rate Announcement and Press Conference; Germany’s PPI; US, Germany, Euro-area, and France Flash Manufacturing PMI; US Unemployment Claims, Philly Fed Manufacturing Index, and Existing Home Sales. Eurogroup meetings will also be held today.

Friday closes the week with BOJ Kuroda’s speech; Euro-area Current Account; UK Public Sector Net Borrowing; Canada CPI and Retail Sales. ECOFIN meetings will be held today.

Extreme Volatility Ends US Payroll Week

It was a news-packed week filled with volatility, and what better way to end the week than with the release of the US Non-Farm Payrolls report. The US Labor Department reported that the nation added 175,000 jobs in May, better than the median forecast of just 167,000. However, unemployment rate ticked back up to 7.6 percent, after printing 7.5 percent in April.

In other news, there were several central banks that declared their rates this week, and all of them left their respective rates unchanged. Reserve Bank of Australia left its rate unchanged at 2.75 percent; both the Bank of England and European Central Bank left their rates at 0.50 percent.

In Australia, the Trade Balance swung back to surplus after a little over 1.5 years of continued deficits. Australian Bureau of Statistics reported Thursday that Trade Balance stood at AUD0.03 billion in April. The last time Australia enjoyed a trade surplus was back in December 2011 (AUD1.33 billion).

Canada, whose economy is just one-tenth that of the US, added 95,000 jobs last May. Unemployment rate stood at 7.1 percent.

Commodities

Gold lost its luster this week as it only traded in a $46 range. The $1,400 level remained influential, and bears continued to dominate, even as price gained above $1,400 on Thursday. $1,400 remains line in the sand, and price should make a strong move away from this level on either side to break out of the current consolidation.

Compared to gold, Oil did much better in this week’s trading. Oil traded $5 higher and even engulfed last week’s candle as price closed the week above the $96 level. Multiple zones of resistance lie ahead and it would be fascinating to see how bulls would fare in the coming weeks. Meanwhile, the downside looks well-supported around $91-$92.

Currencies

After many weeks of trading in confined ranges, EURUSD swung back into volatility as a consequence of extreme JPY moves this week. The pair rose 350 pips this week and reached the coveted 1.3300 level, as the 1.2950 area remained supportive to bulls last Monday. Although the move did not last, the break of 1.3300 for the first time in many weeks could be a sign of a bullish prospect going forward. However, bulls still need to force their way to potential resistance zone around 1.3300-1.3500.

JPY took home to bacon in terms of being the most volatile this week. USDJPY dived 570 pips after the JPY bears bailed out of their positions as the 100 level failed to hold. 95 should hold in the next few weeks; otherwise, more bulls will be in danger as there would be risk of price moving toward 91-92.50.

GBPUSD has drastically changed its fortune this week. The 1.5000 level came very close to getting pulverized in the prior weeks but bullish support came to the rescue in the nick of time. Then the JPY volatility this week has provided strong wind behind GBP’s sails, bringing GBPUSD nearly 500 pips higher this week. Buyers reached a 1.5683 weekly high on Thursday, close to the 1.5700 level which also houses the 200-day MA. 1.5400 should hold during the coming week if the bullish momentum were to remain intact.

 The Week Ahead

On Monday, Japan’s Current Account, Bank Lending, Final GDP; France’s Industrial Production; Switzerland’s Unemployment Rate and Retail Sales; Canada’s Housing Starts; US FOMC Bullard’s speech. Today, some states in Australia will observe the Queen’s Birthday, while China will observe the Dragon Boat Festival.

On Tuesday, there are Japan’s BSI Manufacturing Index, M2 Money Stock, BOJ Press Conference and Monetary Policy Statement; Australia’s NAB Business Confidence and Home Loans; New Zealand’s REINZ HPI; Day 1 of Germany’s Constitutional Court Ruling concerning ECB’s OMT policy; UK’s NIESR GDP Estimate; US Wholesale Inventories.

Wednesday starts early with Japan’s Core Machinery Orders and BOJ Monthly Report; Australia’s Westpac Consumer Sentiment; Day 2 of Germany’s Constitutional Court Ruling concerning ECB’s OMT policy; UK Unemployment Rate, Claimant Count Change, and MPC Member Fisher’s speech; Eurozone Industrial Production; US Federal Budget Balance.

Thursday is the most news-packed day this week with the release of Reserve Bank of New Zealand’s Rate Announcement, Statement, and Press Conference; Australia’s Employment Data and MI Inflation Expectations; Switzerland’s PPI; ECB Monthly Bulletin; Canada’s NHPI; US Retail Sales, Import Prices, Unemployment Claims, and Business Inventories.

Friday ends the week with the release of Business NZ Manufacturing Index; BOJ’s Monetary Policy Meeting Minutes; Eurozone CPI; Canada’s Manufacturing Sales; US Current Account, PPI, Capacity Utilization Rate, Industrial Production, and Preliminary UoM Consumer Sentiment.

BOC Leaves Rate Unchanged as Carney Bids Farewell

Bank of Canada announced last Wednesday that it is leaving its overnight rate target at 1 percent, with the Bank Rate respectively at 1.25 percent and deposit rate at 0.75 percent. The Bank noted that the world economic growth has behaved mainly as expected, but recent economic indicators in Canada showed 2013’s first quarter growth was better than anticipated.  This is the ultimate policy announcement by BOC Governor Carney, who is moving over to the UK to head the Bank of England. Stephen S. Poloz was appointed Governor of the Bank of Canada by the Directors of the BOC last May 2. Beginning this June, Poloz will head the BOC for seven years during his term of office.

In other news, the United States continued to churn out favorable economic data this week. The Conference Board’s Consumer Confidence for May reached 76.2, the highest level in more than five years (expectations of 70.7); the revised version of May’s University of Michigan Consumer Sentiment stood at 84.5 (versus 84.1 expected); and Chicago PMI came in at 58.7, the best reading since March 2012.

Commodities

Gold traded fairly quietly during the first three days of the week, and then it eventually rocketed higher—and fell. Buyers were able to punch through last week’s high but they lacked the firepower to burst through resistance around $1,420. After hitting the week’s high of $1,421, price made a sustained U-turn which managed to erase all of Thursday’s gains, closing the week virtually unchanged at $1,387. This was a big blow to bulls and now they have to protect support around $1,350-70 again.

Oil fared much worse than Gold this week after the former met heavy selling which started just below the $96 level on late Tuesday. The selling snowballed from then on, with oil ending the week on a new low and with a second bearish weekly close targeting the $90 level.

Currencies

EURUSD printed its third weekly higher low and made further recovery this week. Gains were initiated after the touch of the week’s low at 1.2838 last Wednesday spurred buyers to come out and participate. Sellers retreated, leading to gains toward a 1.3060 high. The upside contains a lot of bearish traps, but nevertheless the aim of the buyers is to move towards 1.3200-50 initially.

USDJPY sellers have been dominant all this week, as they were able to confine price hikes to around 102.50 during the mid-week. The battle for control of the 100 level continues next week, with sellers firmly with the starting advantage. A break of this level targets 97 and 98.

GBPUSD printed a new 11-week low but it, too, followed EURUSD higher from Wednesday, rising 225 pips in just two days. Now that the pair is well of the 1.5150 area, buyers must push forward and attempt for a break of 1.5280-1.5300. If successful, this unlocks 1.5450 and higher levels.

The Week Ahead

Unlike the past few weeks, it’s going to be evenly active all throughout this week.

On Monday, Japan will be out with Capital Spending data; Australia has Retail Sales, Company Operating Profits, and ANZ Job Ads; other releases such as China HSBC Final Manufacturing PMI; Spanish, Italian, and UK Manufacturing PMI; Switzerland’s SVME PMI; and US USM Manufacturing PMI.

Tuesday has UK’s BRC Retail Sales Monitor; Australia’s Rate Statement and Announcement, as well as Current Account; Japan’s Average Cash Earnings; Spain’s Unemployment Change; UK Construction PMI and Halifax HPI; Eurozone PPI; US and Canada Trade Balance.

Wednesday has Australia’s GDP; UK, plus Spanish and Italian Services PMI; Eurozone Retail Sales and Revised GDP; US ADP Non-farm Employment Change; Canada’s Building Permits.

Thursday gets busier with the release of Australia’s Trade Balance; Switzerland’s CPI; Germany’s Factory Orders; UK Asset Purchase Facility and BOE Rate Announcement and Statement; ECB Rate Announcement and Press Conference; US Unemployment Claims; Canada Ivey PMI.

Friday remains packed with Australia’s AIG Construction Index; Germany’s Industrial Production and Trade Balance; Switzerland’s Foreign Currency Reserves; UK Consumer Inflation Expectations and Trade Balance; US and Canada Employment data.

Nikkei Dives, JPY strengthens

Japan’s Nikkei started out well early Thursday, climbing 2 percent initially but this changed abruptly. The Japanese index made a sharp turn, tumbling more than 7 percent, brought about by a confluence of events, one of which is concern that the US Federal Reserve might make steps to taper the bond-buying program in the coming meetings. The double-whammy was completed by the release of a weak China HSBC Flash Manufacturing PMI in May, which showed the Chinese economy contracted for the first time in seven months.

On Wednesday, Federal Reserve Chairman Ben Bernanke created confusion around the markets during his speech in front of the US Joint Economic Committee’s Economic Outlook and Monetary Policy in Washington DC. Overall, he made it clear that the future departure from the currently-implemented $85 billion monthly bond purchase program would be different from the prior Fed exits. In Bernanke’s own words, “a step to reduce the flow of (bond) purchases would not be an automatic, mechanistic process to end the program.” He expressed that very first “step” would come in “the next few meetings,” depending on how the economy performs.

Notable news-wise, the US Unemployment Claims made another strong advance in the week ending May 18th, as fewer-than-expected Americans filed their applications for jobless benefits. Unemployment claims eased to a seasonally-adjusted 340,000, fewer than the projection of 347,000. Actual data has beaten median projections in 4 of the last 5 releases.

Commodities

Gold consolidated for the most part of the last seven days between $1,350 and $1,400, with Friday just trading an untypical $16 range. Except for Wednesday’s whipsaw, $1,400 has been able to confine price and buyers should aim for an immediate break of this level in the coming week. Next topside target is the range around $1,480-85.

Oil is looking no good as it slid in 4 of the last 5 days of the recently-concluded week, engulfing the prior 2 weeks’ candles range-wise. The multiple daily tops residing around $97 posed as strong resistance as expected, but so far buyers have held up well above the $92 level for the second week in a row. Traders can expect the $92-$97 range would persist unless the market finds an inspiration to break through this range soon.

Currencies

Following a strong decline from the prior week, EURUSD bears struggled as bulls were able to support price around the 1.280 level for the entire week. Buyers attempted to reach 1.3000 in two occasions but failed; however, they were able to end the week with a positive tone at 1.2929. In order to negate the bearish outlook further, buyers must get past 1.3030-50 immediately next week.

USDJPY printed a new high this week, reaching 103.72 before the tide turned as the Nikkei suffered substantial losses since Thursday. The huge decline in the last two days could become an omen of things to come. Any downside move will surely attack the 99-100 area instantly.

GBPUSD buyers were surely sweating bullets as price approached the 1.5000 level last Thursday. Fortunately, momentum shifted just 13 pips from this level which enabled a good recovery in the last two trading days. The 20-day average sits around 1.5261, just ahead of significant resistance around 1.5270-1.5300. A break of this area can aid price back to 1.5450-1.5500.

The Week Ahead

Except for the release of the Bank of Japan Monetary Policy Meeting Minutes, it is going to be another quiet Monday. UK will observe the Spring Bank Holiday, while the United States will observe Memorial Day.

Tuesday is just a little bit more active with the release of Switzerland’s Employment Level and Trade Balance; Germany’s Import Prices; US S&P/CS Composite-20 HPI and Consumer Confidence.

Wednesday gets much busier with Japan’s Retail Sales and BOJ’s Kuroda speech; Australia’s Construction Work Done data and HIA New Home Sales; Germany’s Unemployment Change and Prelim CPI; Euro-area Private Loans and M3 Money Supply; UK CBI Realized Sales; Bank of Canada’s Rate Announcement and Statement.

Thursday sees the release of New Zealand’s Building Consents; Australia’s Private Capital Expenditure and Building Approvals; Switzerland’s GDP; UK Nationwide HPI; Canada’s RPMI, Current Account, and IPPI; US Unemployment Claims, Prelim GDP, Prelim GDP Price Index, and Pending Home Sales.

Friday will be the most jam-packed this coming week with the releases coming in the form of New Zealand’s Overseas Trade Index and ANZ Business Confidence; Japan’s Unemployment Rate, CPI, Household Spending, Housing Starts, and Prelim Industrial Production; Australia’s Private Sector Credit; Germany’s Retail Sales, France Consumer Spending; Switzerland KOF Economic Barometer; UK Net Lending to Individuals; Euro-area Unemployment Rate and CPI Flash Estimate; Canada GDP; US Personal Income, Personal Spending, Chicago PMI, Revised UoM Consumer Sentiment, and Core PCE Price Index.

US Consumer Optimism Grows; Dollar Leads the Pack

The latest Consumer Sentiment published by the University of Michigan trumped all forecast for the month of May. The preliminary May figure rallied to 83.7, the best reading since July 2007, following an April reading of 76.4.

Meanwhile, the Conference Board issued its latest Leading Economic Index for the United States and this showed a 0.6 percent gain to 95.0 in April. These two upbeat late-Friday news led the US Dollar to rally against 16 of its actively traded peers and the Dollar Index to advance to its highest in nearly three years.

In other news, US Consumer Price Index slipped more than forecast to 0.4 percent in April, falling for a second month in a row. This contrasts with the minus 0.3 percent forecast and last month’s 0.2 percent decline. On the other hand, US unemployment weekly claims rose more than the median estimate during the prior week. It climbed to 360,000 versus expectations for only 332,000. The earlier week’s reading was revised from 323,000 to 328,000.

Yearly inflation rate in Canada, the 11th biggest economy in the world, slowed to its weakest level in over three years, even declining below the target range of the Bank of Canada. Declining gasoline prices was the main cause, and “price decreases for the purchase of passenger vehicles were also a factor,” according to Statistics Canada on Friday. Five out of the eight major components reported a decrease in April.

Commodities

Gold has slid more than $90 this week as buyers failed to support price and reach toward the $1400 level the entire week. With five straight days of decline, price will now move closer to the latest low printed last April at $1,321. The yellow metal’s decline this year is closing in on the 20 percent mark.

Growing optimism in the United States had spurred Oil to recover from the mid-week drop and create three straight days of gains, enabling it to close the week virtually unchanged. Price closed the week in the upper-$95 after reaching back towards the mid-$96. Soon, price will have to contend with recurring resistance in the upper-$96s and through the $97 level.

Currencies

Except for Monday, EURUSD took on a bearish bias and slid all week soon after bears proved that buyers won’t be able to sustain prices above the 1.3000 level. The pair reached as low as 1.2795 before closing the week at 1.2835. Near-term outlook is a bearish move towards 1.2500-1.2600.

Despite the rugged moves this week, USDJPY came out stronger as it reached beyond the 103.00 level last Friday, boosted by favorable US data in the form of University of Michigan’s Consumer Sentiment for May and the CB Leading Economic Index. The pair has rallied higher for the eighth straight month now, hence any corrections, sooner or later, won’t be surprising.

Straight off from Monday’s trading, GBPUSD has already been decidedly bearish. The mid-week correction only afforded more bears to enter or reload their shorts, sinking price further below the 1.5200 level into the week’s close. If momentum continues, next target comes in at the 1.5000-30 area.

The Week Ahead

The new week has key economic releases scattered throughout every single day except Monday, with more releases to be published mid-week as usual.

On Monday, Switzerland, Germany, France, and Canada are all on holiday, with the first three countries observing Whit Monday. Canada will celebrate Victoria Day.

Tuesday jumpstarts the economic week with the release of Australia’s CB Leading Index, and RBA’s Monetary Policy Meeting Minutes; New Zealand’s Inflation Expectations; UK’s PPI, RPI, HPI, and CPI; Germany’s PPI. FOMC’s Bullard and US Treasury’s Lew will also provide speeches.

On Wednesday, there are Japan’s Trade Balance, Monetary Policy Statement, and BOJ Press con; Eurozone Current Account data; UK Retail Sales, Public Sector Net Borrowing,  and MPC Meeting Minutes; EU Economic Summit; Canada Retail Sales; US Existing Home Sales and FOMC Meeting Minutes.

Thursday starts off early with Australia’s MI Inflation Expectations; China HSBC Flash Manufacturing PMI; Germany, France, and Eurozone Flash Manufacturing and Services PMI; UK Second Estimate GDP and Preliminary Business Investment; and US Flash Manufacturing PMI, Unemployment Claims, New Home Sales, and HPI.

Finally on Friday, releases will come in the form of New Zealand’s Trade Balance; BOJ Kuroda’s speech; German Final GDP and Consumer Climate; Buba President Weidmann’s speech; US Durable Goods Orders.