Analysis

There was a lot of information to digest this week as four major central banks released their interest rate decisions and statements.

The Bank of England, Reserve Bank of Australia, and the Bank of Canada all decided in keeping their respective interest rates unchanged (0.50 percent, 2.50 percent, and 1 percent, respectively).

Meanwhile, the spotlight was on the European Central Bank as they strayed from the pack and announced on Thursday a surprise cut in its benchmark interest rate to 0.05 percent from 0.15 percent. It also slashed its deposit rate by 10 basis points to -0.20 percent from -0.10 percent. The ECB “will purchase a broad portfolio of simple and transparent securities” in line with its plan to incite economic growth and hold against possible deflation. Draghi hinted on QE-style action in the coming months, and said “the governing council is unanimous in its commitment to using additional unconventional instruments.”

In other news, Manufacturing PMI in the UK, Spain, and Italy all came in weaker than expected. Spain and UK Services PMI, however, beat expectations.

Germany’s Factory Orders showed a strong rebound in July, rising 4.6 percent after posting two consecutive monthly declines.

Commodities

Gold resumed its decline this week after a successful bear defense of the $1,300 level. Price indeed rolled down further toward $1,250, reaching a weekly low of $1,257. Expect increase bearish pressure in the coming week toward potential support area at $1,240-$1,250.

Oil mirrored the prior week’s price range after the $96 level successfully held in the first three days. Price is nearing the 69-week low set on January in the low-$91s. If price breaks the $90-$91 area, price could tailspin to a swift toward $84-$86.

 Currency Pairs

USD is on a strong roll right now and EURUSD is manifesting this clearly. The pair is now in an 8-week losing streak after the 1.3000 level easily got broken this week. The weekly close at 1.2950 is very bearish; however, long-term support is just around the corner at 1.2750-1.2800.

GBPUSD dropped big time this week. Price went down nearly 370 pips, its widest trading range in close to 30 weeks. The easy break of 1.6500 imposes a serious concern in bulls’ minds. The 1.6000-1.6200 area is now at risk.

USDJPY resumed its advance this week after making a temporary pause around the 104 level. The strong bullish weekly close this week indicates there is a possibility of this pair moving to new highs. If it does not, bulls should create support in the 104-105 zone.

The Week Ahead

The second week of September will be evenly busy throughout the week.

On Monday, keep an eye on Japan’s Current Account and Final GDP; Australia’s ANZ Job Advertisement; China’s Trade Balance; Switzerland’s Retail Sales, CPI, and Jobless Rate; Germany’s Trade Balance; UK Halifax HPI; and Canada’s Building Permits.

On Tuesday, traders will look forward to the release of Japan’s BOJ Monetary Policy Meeting Minutes and Tertiary Industry Activity; Australia’s NAB Business and Home Loans; UK Trade Balance, NIESR GDP Estimate, and Manufacturing Production; Canada’s Housing Starts; US JOLTS Job Openings.

On Wednesday, there will be Japan’s Core Machinery Orders; Australia’s Westpac Consumer Sentiment; China’s New Loans; France’s Industrial Production; UK Inflation Report Hearings.

On Thursday, RBNZ will have its Rate Announcement, Press conference, and Monetary Policy Statement. Other economic releases include Japan’s BSI Manufacturing Index; Australia’s MI Inflation Expectations and Jobs data; China’s CPI and PPI; ECB Monthly Bulletin; Spain’s HPI; US Unemployment Claims.

Friday ends the week with New Zealand’s FPI and Business NZ Manufacturing Index; BOJ Kuroda’s speech; Eurogroup Meetings; US Retail Sales, Import Prices, and Preliminary UoM Consumer Sentiment

The US Federal Reserve has decided on Wednesday to keep rates on hold as expected. Spotlight was then focused on US jobs numbers which came out weaker than expected. The Bureau of Labor Statistics reported that Non-Farm Employment Change grew less than expected in July, 209,000 versus 231,000 forecast. The actual number was lower than the 218,000 ADP Non-Farm Employment Change published on Wednesday. The surprise came from the Unemployment Rate number, which worsened to 6.2 percent, following three consecutive months of better-than-actual readings.

In other US news, Pending Home Sales dipped 1.1 percent in June, following a 6 percent advance in the prior month. The July CB Consumer Confidence index improved further to 90.9 in July, the highest reading since January of 2008. Chicago PMI fell 10 points to 52.6 in July.

In other news, Australia’s Building Approvals for June dropped 5 percent, following the 10.3 percent increase in May. Meanwhile, PPI surprised with a 0.1 percent dip in June.

Commodities

Gold formed its third consecutive bearish weekly candle after sellers managed to push the price down through the $1,300 level. If this level holds in the coming weeks, expect a move toward $1,250 or even lower.

After last week’s inside bar, Oil dropped like a waterfall as sellers piled in through stops below $100. Price declined just a little over $5 to reach the lower $97s, prices unseen since early-February of this year. A thick zone of resistance may have now formed above $100, so bears may have an easier time pounding oil in the next few days or weeks. If bearish momentum will persist, downside target will be $90-$91.

Currency Pairs

EURUSD hit its third bearish weekly close this week (nearly hitting the mentioned area at 1.3300-50), although Friday’s price action eradicated most of the week’s decline. The move is not surprising considering this pair has been relentlessly on-sided since the start of July. Bulls have an opportunity to recover, but the acid test just right at 1.3500. This level is followed by thick resistance in 1.3600-1.3700.

Bearish sentiment has been more pronounced in GBPUSD than EURUSD, as we have witnessed nearly 100 pips of decline in Sterling this week. Sellers are looking to target 1.6700, but bulls may have a chance to thwart that if the Dollar will decline in the coming week.

USDJPY finally posted two bearish days to contrast from the 9 consecutive bullish days behind it. Sellers came in at the 103 level however the decline has been relatively weak, as price managed to close the week not far behind at 102.60. This could indicate more bullish moves will come in the next few days.

The Week Ahead

Monday will have a spattering of news throughout the day, starting with Australia’s Retail Sales and ANZ Job Ads; Spain’s Unemployment Change; Switzerland’s SVME PMI; and UK’s Construction PMI. Australian banks will be closed to observe Bank Holiday, while Canadian banks observe Civic Day.

Tuesday will have improved news activity with Australia’s Trade Balance and RBA’s Rate Announcement and Statement; UK Halifax HPI and Services PMI; Spain and Italy Services PMI; Eurozone Retail Sales; US Factory Orders and ISM Non-Manufacturing PMI.

Wednesday will have a moderate news activity but will start early with New Zealand’s jobs data; Germany’s Factory Orders; Switzerland’s CPI; UK Manufacturing Production and Industrial Production; Italy’s Prelim GDP; US and Canada Trade Balance;

After Thursday’s jobs data from Australia, the market will focus on Europe with the release of ECB and BOE rate announcements and statements. These will be followed by Canada’s Building Permits and Ivey PMI; and US Jobless Claims.

Friday will still be lively in the news front with Japan’s Current Account and BOJ Monetary Policy Statement and BOJ presscon; Australia’s Home Loans and RBA Monetary Policy Statement; China’s Trade Balance; Germany and UK Trade Balance; France’s Industrial Production; Canada jobs data; and US Prelim Nonfarm Productivity and Prelim Unit Labor Costs.

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.

Commodities

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.

Currency Pairs

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.

The focal point this week was on the employment outlook in several parts of the world. In Australia, the Bureau of Statistics reported employers hired 15,900 more people in June, compared a 5,100 decline in May. The Jobless Rate ticked higher from 5.9 percent to 6 percent.

Meanwhile, Canada saw a dimmer jobs outlook as Statistics Canada reported a surprise 9,400 decline in Employment Change. Analysts were expecting another month of increased hiring (median forecast 20,700). The Unemployment Rate also ticked higher in June to 7.1 percent.

In other news, Canada’s Building Permits got a surprise surge in May, attributed to shopping malls and multi-dwellings in Vancouver and Toronto. Permits surged 13.8 percent, the strongest seen since late-2013. The June Housing Starts came in slightly better than expected, while Ivey PMI sank further below 50 to 46.9, the worst reading since December.

Commodities

Gold bulls were able to maintain control of price this week, etching the sixth straight weekly bullish close well above the $1,300 level. We could be seeing a hardened support just above $1,300 for a potential move back toward $1,400. This is important in order to prevent another breakdown toward $1,250.

Meanwhile, Oil has made big moves in the past few weeks, sliding about $7 in three successive bearish weeks. Bulls will now have to contend with further selling pressure as price breaks apart the $100 barrier. Since the move toward $100 has come much earlier than expected, we can now expect the risk of a move back down to the $90-$95 area.

Currency Pairs

EURUSD trading activity has eased this week despite the marginal bullish weekly close above 1.3600. This move is more favorable to bears than bulls, hence bulls should keep pushing price up. A break of 1.3700 is important to reduce the bearish tone. The more price stays unchanged, the higher the risk of this pair visiting 1.3500.

GBPUSD traded in the upper part of the prior week’s 170-pip range, giving back some gains after comfortable five-week winning streak. Although the retreat was minimal, bears could still unleash a barrage of selling pressure in the coming weeks, so buyers must prepared to defend the 1.7100 level.

The significant gathering of USDJPY sellers this week enabled this pair to fulfill another bearish week – this time price closed at its lowest since mid-November of 2013. Could this be the beginning of the end? Last possible bulwark could sit around the 100-101 area. Beyond that, we could see a quick trip toward 95-98. All this selling pressure won’t dissipate unless bulls take out the 103 level.

The Week Ahead

Monday is mostly quiet except for the release of Japan’s Revised Industrial Production; China’s New Loans; and Eurozone’s Industrial Production and ECB Draghi’s speech.

Activity will pick up significantly on Tuesday with UK BRC Retail Sales Monitor; Australia’s New Motor Vehicle Sales and RBA’s Monetary Policy Meeting Minutes; BOJ’s Monetary Policy Statement and presscon; Switzerland’s CPI; UK PPI Input, PPI and RPI; Germany and Eurozone ZEW Economic Sentiment; US Retail Sales, Empire State Manufacturing Index,, Business Inventories, Import Prices, and Fed Yellen’s testimony before the US Senate Banking Committee.

A very busy Wednesday will start early with New Zealand’s CPI; China’s Fixed Asset Investment, GDP, Industrial Production, and NBS presscon; UK Claimant Count Change, Average Earnings Index, and Unemployment Rate; Canada’s Manufacturing Sales, BOC Rate Announcement and Statement, presscon, and Monetary Policy Report; US PPI, Capacity Utilization Rate, Industrial Production, TIC Long-Term Purchases, and Beige Book.

Thursday will start with Australia’s CB Leading Index and NAB Quarterly Business Confidence; Eurozone CPI; Canada Foreign Securities Purchases; US Unemployment Claims, Housing Starts, Building Permits, and Philly Fed Manufacturing Index

Friday ends the week with BOJ’s Monetary Policy Meeting Minutes; Canada CPI and Wholesale Sales; and US preliminary UoM Consumer Sentiment.