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Currency Trends & Insights

EURUSD

BOJ’s Kuroda Delivers; US Jobs Data Doesn’t

Bank of Japan’s new chief Kuroda delivered on the easing plans set by the government headed by PM Shinzo Abe. According to the Monetary Policy Statement, the Policy Board of BOJ agreed to introduce qualitative and quantitative easing and plans to double its holdings of Japanese government bonds and ETFs within two years. Kuroda said the BOJ may act more depending on the future economic developments. Further, he said the 2% inflation target is achievable and there is no concern for any asset bubble. BOJ Overnight Call Rate remained at less than 0.10 percent.

The European Central Bank and Bank of England also kept their respective rates unchanged on Thursday. The rates were held at 0.75 percent and 0.50 percent, respectively. Similarly, the BOE’s Asset Purchase Facility was maintained at GBP375 billion.

On Friday, the US jobs data disappointed the market with a surprisingly weak reading. Non-Farm Employment Change for March came in 88,000, much weaker than the 198,000 median expectations and the prior month’s 268,000. Labor participation rate also plunged to the weakest since 1979 at 63.3 percent. Unemployment rate eased to 7.6 percent.

Commodities

Gold sellers won this week as they were able to pressure price lower after the $1,600 level failed to hold. Price made a quick slide, reaching as low as $1,539 as buyers failed to halt the selling rampage. However, things changed on Friday when a weak US employment data sent Gold soaring back up and interrupted the week’s downmove. Gold closed the week at $1,580 and has a fair chance to reach above the $1,600 next week. The critical question is: how bullish are the buyers at this stage?

Oil reversed all of its previous week’s gains – and then some – this week after the climb above the $97 level proved unsustainable for eager bulls. Price reached toward the resistance area in the upper-$97s and this initiated a price tumble that precipitated all 5 trading days of this week. Oil plunged to $91.91 on Friday before price snapped back up to close the week at $93. Price is likely to enter into consolidation or create a follow-on downmove of buyers won’t step in to bring price back higher from here.

Currencies

EURUSD has finally shown signs of life after it made a significant reversal from the 1.2740s this week. ECB kept rates unchanged on Thursday. The weak US jobs data on Friday helped put more wind in EURUSD’s sail as the pair climbed back above the 1.3000 level. The pair reached a 1.5-week high of 1.3038 before it closed the week at 1.2988. Barring poor momentum and Eurozone developments, the pair is on track to move higher and back to the 1.3500s.

USDJPY had a spectacular week as the BOJ and its new chief Kuroda delivered well in his first-ever press conference. The pair rocketed 500-pips higher in just two days and it seems it could continue on for some time. Buyers should now guard the 95-96 area to maintain the current momentum.

GBPUSD, like EURUSD, was sent higher on Thursday and Friday after the week’s developments. The Bank of England also kept the rates and its Asset Purchase Facility unchanged and the pair sprung higher by 320 pips. The climb easily pierced through the key resistance at 1.5300 level and this give buyers a better chance at higher prices. 1.500 stands in the way ahead of 1.57-1.58.

The Week Ahead

On Monday, the market will witness the release of economic data such as Japan’s Economy Watchers Sentiment and Current Account, Australia’s ANZ Job Advertisements, Euro-area Sentix Investor Confidence, Germany’s Industrial Production, and Bank of Canada Business Outlook Survey.

On Tuesday, there are reports including NZIER Business Confidence, UK’s BRC Retail Sales Monitor and RICS House Price Balance, Japan’s Monetary Policy Meeting Minutes, China’s PPI and CPI, Germany’s Trade Balance, Switzerland’s Retail Sales, UK’s Trade Balance and Manufacturing Production, and Canada’s Housing Starts and Building Permits.

Wednesday will be slightly quieter this week with only a few key releases such as Australia’s Westpac Consumer Sentiment, China’s Trade Balance, Italy and Eurozone Industrial Production, and FOMC Meeting Minutes.

On Thursday, there are New Zealand’s Business NZ Manufacturing Index, Japan’s Core Machinery Orders, Australia’s Employment data, ECB Monthly Bulletin, and US Unemployment Claims. FOMC’s Bullard and UK MPC’s Tucker will also be expected to give speeches.

Finally on Friday, there news releases such as Japan’s Tertiary Industry Activity, Germany’s WPI, Euro-area Industrial Production, and US PPI, Retail Sales, and preliminary University of Michigan Consumer Sentiment. Eurogroup meetings and ECOFIN meetings will also take place. Moreover, speeches may be delivered by US Federal Reserve’s Rosengren and Bernanke.

Cyprus Developments Under Way While Euro Struggles On

Macro Economic/Political Events

Developments in Cyprus are underway as officials continue their discussions to bailout the ailing island nation. Among the key developments is the institution of capital controls which includes enforcing no cap on the amount that debit and credit cardholders can spend within the country; withdrawal limit of EUR300 daily; overseas purchase limit of EUR 5,000 monthly; encashing of checks are banned, among others. These controls are said to be subject for review on a daily basis and are expected to last for a month or so.

Banks in Cyprus have reopened while the stock exchange remained close. According to the stock exchange’s Chief Executive Officer Nondas Metaxas, the stock exchange may open for limited trading on Tuesday (April 2) after being closed for about two weeks since Cyprus faced the financial crisis.

In other news, New Zealand surprised the market with a much better than expected February Trade Balance data on Tuesday. Statistics New Zealand reported a whopping NZD414 million surplus compared to an expectation of just NZD2 million. January’s reading was also revised higher to minus NZD287 million from minus NZD305 million. Consumption goods in the form of sheep meat and milk powder contributed the most in the rise of exports to China.

Meanwhile, US Revised University of Michigan Consumer Sentiment, US S&P/CS Composite-20 HPI, and US Durable Goods Orders all advanced. In Japan, Retail Sales and Household Spending came in better than expected while deflation remains, as shown by the CPI data.

Commodities

The Gold move above $1,600 seemed short-lived as price took back most of the gains from last week, even moving back to last week’s closing area and moving slightly below its low before ending the week at $1,596. Monday’s $24 drop was too much for the bulls and price merely traded within this range, mostly trading in the lower half portion of this range. This is a minor setback for bulls; they still need to bring price higher and above the $1,620 resistance.

Oil enjoyed another bullish week as it set its 4th weekly bullish close, closing above $97 this time. Bulls drove price higher by nearly $4 as they aim for a break of $98.22 ahead of $100. Given the current price action, it won’t be surprising to see a pullback ahead of the near-term resistance before any eventual upmove.

Currencies

EURUSD saw another week with a gap down and a weaker close. The pair gapped down slightly on Monday which set the pace for the entire week. More sellers joined the fray when price made a temporarily climb above 1.3000, and this created a 218-pip move on the first day of the week. Price traded lower from then on until reaching a 1.2750 low before a meaningful bounce. Sellers could still be aiming for the 1.2600s before we could see another visit above the 1.3000s. Traders ought to watch the developments in Cyprus.

USDJPY wandered around aimlessly in a 140-pip range this week since price broke down the key 95 level in the prior week. Buyers attempted to breach the 95 level twice this week but they easily failed. This pair should see more action next week with the BOJ rate announcement.

GBPUSD followed through from its impressive recovery the other week, now stalking the key 1.5300 level. The week started pretty rough as the market digested the news about Cyprus bank levies last week. The pair was not spared of this negative development and it ranged for three days before it resumed its climb. With a week high at 1.5245, the pair is just a few pips a way from its near-term target. What’s critical is the bullish momentum as price moves through the 1.5300 level – bulls must make a concerted push higher.

The Week Ahead

Daylight Saving Time shift will happen in Switzerland, the UK, and several Eurozone countries. Meanwhile, New Zealand and Australia will exit DST on April 6 (Saturday) and April 7 (Sunday), respectively.

On Monday, New Zealand, Australia, France, Switzerland, Germany, Italy, and the UK will observe Easter Monday. On Thursday and Friday, China will observe Tomb Sweeping Day.

News-wise, Monday will see the release of Japan’s Tankan Manufacturing and Non-Manufacturing Index, China HSBC Final Manufacturing PMI, US Final Manufacturing PMI, US Construction Spending, and US ISM Manufacturing PMI.

On Tuesday, there are Japan’s Monetary Base, Average Cash Earnings; Australia’s Cash Rate and RBA Rate Statement; Spain Unemployment Change, Germany’s Preliminary CPI, Italy and Spain Manufacturing PMI, Italy Monthly Unemployment Rate, and Euro-area Final Manufacturing PMI; UK Halifax HPI, Net Lending to Individuals, M4 Money Supply, and Manufacturing PMI; US IBD/TIPP Economic Optimism, Factory Orders, and Total Vehicle Sales. FOMC Member Evans will also give a speech.

Wednesday will start off with Australia’s HIA New Home Sales and trade balance, China’s Non-Manufacturing PMI, UK BOE Credit Conditions Survey, UK Construction PMI, Eurozone CPI Flash Estimate, US ADP Non-Farm Employment Change, Crude Oil Inventories, and ISM Non-Manufacturing PMI.

Thursday will get much busier with Australia’s Retail Sales and Building Approvals; Japan’s Overnight Call Rate, BOJ Press Conference, and Monetary Policy Statement; Italy, Spain, and UK Services PMI; Eurozone Final Services PMI and PPI; ECB Rate Announcement and Press Conference; UK Asset Purchase Facility, Bank Rate, and MPC Rate Statement; US Unemployment Claims, and speeches from Fed Chairman Bernanke, and FOMC Member George, Evans, and Yellen.

Finally on Friday, there are economic releases such as BOJ Monthly Report, Switzerland Foreign Currency Reserves, Euro-area Retail Sales, Germany Factory Orders; Canada and US Employment data and Trade Balance, Canada Ivey PMI, and US Average Hourly Earnings.

Markets Await Resolution in Cyprus Financial Crisis

Macro-Economic Events

Last weekend, a group meeting involving the Cyprus government, the European Commission, the ECB, and the International Monetary Fund concluded with an announcement that Cyprus needed bailout as it was on the brink of a financial crisis.

In an effort to stave off financial collapse in the small Mediterranean island nation, officials along with the Cypriot government initially agreed to enforce a plan wherein part of the bailout funds would come from graduated bank deposit levies. This original plan has been vehemently opposed by local officials, and Cypriots took to the streets to protest the “legal robbery” looking to be imposed upon them. Employees of affected banks also joined the street demonstrations to express rejection of plans to restructure several Cypriot banks, including the two largest banks in the island nation. Eurozone finance ministers and Cypriot officials have been taking emergency meetings and conference calls as they scramble to create a resolution to the ongoing crisis. Recent discussions revolve around plans which include institution of capital controls, bank levies, and bank restructuring, among others.

There are now unconfirmed reports that a bailout deal has been struck between the troika and the Cypriot government officials; bailout deal deadline remains on Monday.

Commodities

Gold has made some progress as it printed a weekly close above the $1,600 level for the very first time in five weeks. Looking at the daily chart, we would see $1,616 effectively keeping a lid on price all throughout this week. Price still needs to come higher and break the near-tem resistance at $1,620 unless sellers prefer to revisit the $1,550-70 area initially.

Oil also made a key weekly close this week, while creating its third bullish weekly close. Price closed well above the $93 level and even made a brief thrust above $94 during the first two days. Since the downside has been supported quite well, buyers can now attempt to take price above $95 to reach the 2012 highs seen in late-January.

Currencies

EURUSD had a very rough start to the week as it gapped down nearly 170 pips after closing the prior week at 1.3074. This was caused by weekend news that Cyprus will impose levies on bank deposits across the country. The pair meandered around a 160-pip range throughout the week, trading in the 1.2900s for the most part. On Friday, the pair traded higher, reached a 1.3009 high before closing the week a few pips below the key 1.3000 level. Bulls must try to get back to the 1.3100s this coming week to help resume their campaign.

USDJPY gapped down in harmony with EURUSD’s slide on Monday. The pair’s inability to hold above 96 remained on the table and sellers pounded prices lower again this week. The drive lower led to a bearish weekly close, which would now permit sellers to take some revenge and fight for a move towards 90.

GBPUSD followed through from its impressive recovery the other week, now stalking the key 1.5300 level. The week started pretty rough as the market digested the news about Cyprus bank levies last week. The pair was not spared of this negative development and it ranged for three days before it resumed its climb. With a week high at 1.5245, the pair is just a few pips a way from its near-term target. What’s critical is the bullish momentum as price moves through the 1.5300 level – bulls must make a concerted push higher.

The Week Ahead

As usual, Monday will start off with a relatively quiet tone. Only notable releases are UK’s BBA Mortgage Approvals, and speeches from SNB Governor Board Member Danthine, FOMC’s Dudley and Federal Reserve Chairman Bernanke.

On Tuesday, there will be New Zealand’s Trade Balance, speech from RBA Governor Stevens, UK’s Nationwide HPI and CBI Realized Sales, US S&P/CS HPI, US Durable Goods data, US New Home Sales, and US CB Consumer Confidence.

Wednesday will get busier with New Zealand’s ANZ Business Confidence, RBA’s Financial Stability Review, Germany’s Gfk Consumer Climate, UK Current Account, UK Final GDP, Switzerland’s KOF Economic Barometer, Euro-area Retail Sales, Canada’s CPI, and US Pending Home Sales.

For Thursday, the market will witness the release of Australia Private Sector Credit, Japan Retail Sales, Germany’s Unemployment Change and Retail Sales, Euro-area M3 Money Supply, Euro-area Retail PMI, Canada’s GDP and RMPI, US Final GDP, US Chicago PMI, and US Unemployment Claims.

Friday will be very quiet as banks will be closed in New Zealand, Australia, Germany, Switzerland, the UK, and Canada to observe Good Friday. Japan will be out with CPI, Household Spending, Unemployment Rate, and Housing Starts. US will publish Personal Spending, Personal Income, Core PCE Price Index, and the revised reading of University of Michigan’s Consumer Sentiment.

Exceptional Australia Employment Data Lifts Aussie Dollar

Australian Bureau of Statistics reported on Thursday a surprisingly strong Employment Change number, rising 71,500 versus 9,500 median expectations. Unemployment rate declined to 5.4 percent as full-time and part-time employment gained.

After the ECB, BOE, BOJ, BOC, and RBA all made their respective interest rate announcements last week, it was RBNZ’s turn this week. Reserve Bank of New Zealand has maintained its Official Cash Rate (OCR) at 2.50 percent. According to the Monetary Policy Statement from RBNZ, the global market sentiment has somehow improved as worldwide growth risks recede. On the domestic front, policymakers saw an uneven economic recovery as labor market remains relatively weak. The next release is expected on April 24.

In other news, US Retail Sales rose 1.1 percent in February, the best reading in the last five months, on the back of improving labor market conditions and household finances. Meanwhile, the March preliminary reading for University of Michigan Consumer Sentiment weakened to its lowest since late 2011 as consumers expressed dismay over the government’s fiscal policy decisions. The sentiment index fell to 71.8 compared to median expectation of 78.2.

Commodities

Gold has traded a mere $25 range in the March 10 week and was unable to breach–and even touch–$1,560. This led to a rebound in price this week where bulls were also unable to touch the $1,600 level. Keen buyers still need to face the topside resistance at $1,620 and $1,650 before they can even relax a bit.

Oil also rebounded this week after touching a $89.33 low in the prior week. From $90.88, oil rose to $93.81 and looks ready to take on a move towards $98.22, the 2012 high set on January 27. The journey would not be smooth as bulls have to contend with potential sellers around the $95 area.

Currencies

EURUSD has pretty much consolidated this week but this changed as the weekend neared, as price made range downside and topside breaches on Thursday and Friday, respectively, reaching as low as 1.2910 and as high as 1.3106. Having said that, the pair remains in consolidation and buyers must attempt a break of 1.3150 ahead of key resistance at the 1.3300 level.

USDJPY bulls have attempted to make another milestone by reaching the 97.00 level but they failed all five days of this week. Because of this, sellers stepped in to drive price lower on Friday, nearly touching the 95 level and closing the week just about 30 pips higher than this important level. It would be interesting to see if sellers would continue their campaign next week.

GBPUSD made an impressive recovery this week, rising 345 pips from 1.4830 lows to Friday’s 1.5175 weekly high to end the week just above 1.5100. In so doing, bulls have now increased their chance to revisit and break the infamous 1.5300 level. If they will make good of this golden opportunity, they would be able to unlock a potential trip to 1.5700 ahead of the 16-month high at 1.6338.

The Week Ahead

Mid-week will be evenly busy, while Monday and Friday will be moderate as they typically are.

Monday will start off with New Zealand’s Westpac Consumer Sentiment, followed by Australia’s New Motor Vehicle Sales, Switzerland’s SECO Economic Forecasts, Italy’s Trade Balance, Euro-area Trade Balance, Canada’s Foreign Securities Purchases, and finally US NAHB Housing Market index.

On Tuesday, Australia’s central bank will release its Policy Meeting Minutes coupled with speeches from RBA Assistant Governor Debelle and RBA Deputy Governor Lowe. China will be out with its Foreign Direct Investment report; followed by Italy’s Industrial Production; UK CPI, RPI, HPI, and PPI, as well as BOE Inflation Letter; Euro-area and Germany’s ZE Economic Sentiment; Canada’s Wholesale and Manufacturing Sales; and US Building Permits.

Wednesday sees the release of New Zealand Current Account, Euro-area Current Account, Germany’s PPI, UK MPC Meeting Minutes, UK Annual Budget Release, UK Unemployment Rate, UK Claimant Count Change, Euro-area Consumer Confidence, Germany’s 10-year Bond Auction, Switzerland ZEW Economic Expectations, US FOMC Statement and Rate Announcement and Press Conference.

For Thursday, there are New Zealand’s Gross Domestic Product report; Australia’s RBA Bulletin; Japan and Switzerland Trade Balance; China, Germany, US, and France Flash Manufacturing PMI; UK Retail Sales; Canada Retail Sales; US Philadelphia fed Manufacturing Index and Existing Home Sales.

On Friday, economic news release activity tapers off with only a few releases on tap such as Australia’s CB Leading Index and speech from RBA Assistant Governor Edey, and Business Climate reports from Belgium and Germany.

The Dollar Rises as US Payroll Data Exceeds Forecast

US employers ramped up their payrolls and employment climbed 236,000 in February, a report from the US Department of Labor’s Bureau of Labor Statistics showed on Friday. This came as a surprise as median forecast by analysts and economists were for a 162,000 advance. Unemployment rate has slid to 7.7 percent from January’s 7.9 percent reading. The US unemployment rate has stayed in the 7 percent mark for 6 consecutive months now.

In other news, Statistics Canada reported that employers has gone back to adding jobs in February, with employment rising 50,700 after it declined 21,900 in January. This rebound in jobs growth is the third highest figure in the last 10 months. Unemployment rate has steadied at 7 percent.

The European Central Bank, Bank of England, and Bank of Japan made their interest rate decisions this week. All three central banks maintained their rates, at 0.75 percent, 0.50 percent, and less than 0.10 percent, respectively. Next announcement for all three central banks would come in April 4. Meanwhile, Reserve Bank of Australia and Bank of Canada also retained the rates, at 3 percent and 1 percent respectively, and would have their next decisions announced on April 2 and April 17.

Commodities

Gold has gone very quiet this week as trading became confined mostly between $1,560 and $1,585 – a mere $25 range for the most part. It would be quite interesting to see which side comes away victorious in the coming few weeks. $1,550 is the key area on the downside, while bulls would have to face $1,620 and $1,650 before other resistances on the topside.

Unlike Gold, Oil has fared a little better this week as it managed to climb towards $92 after being confined in a range battle around the $90s in the first half of the week. The lower-$89s has been well-supported by buyers and this gave them the base for a move higher. $92 has been hit in transit but price ended the week slightly lower at $91.84. $93 and $94.50 are the next targets higher as long as the $89-$90 area holds.

Currencies

EURUSD had an uninspiring week as bulls failed to cement the move higher to the 1.3100s during Thursday and Friday. The pair spent most of its time in the 1.3000s and in fact the week closed at 1.3003, about 8 pips lower than its open. Buyers need to act decisively this coming week, otherwise the chances of 1.3000 breaking convincingly grows further.

After trading to the downside last week, the rollercoaster ride has come full circle as USDJPY made another milestone this week. The pair has zoomed 360 pips higher, broke the key 95 level, and reached as high as 96.54 before settling back to the 95s and closing the week at 95.97. USDJPY is not set to create a fresh 41-month high if buyers can reach 98.

GBPUSD has created four lower weekly highs and four bearish weekly closes, and yet bears seem eager for more destruction. This week, sellers pressed lower and reached 1.4883, just a few pips shy of July 2010’s 1.4872 low. Bulls now need to make drastic steps to prevent further price declines, but so far there is not much holding bears back from reaching 1.4200 to 1.4600.

The Week Ahead

Starting March 10, Canada and the United States will implement the Daylight Savings time shift and clocks will move ahead by 1 hour.

This time around, Monday will have a sparse amount of critical news releases, such as Japan’s Core machinery Orders, China’s New Loans, Germany’s Trade balance, France’s Industrial Production, and Switzerland’s Retail Sales.

On Tuesday, there will be Japan’s BSI Manufacturing Index, Consumer Confidence, and BOJ Policy Meeting Minutes; UK’s RICS House Price Balance, Trade Balance, and Manufacturing Production; Australia’s NAB Business Confidence; and US Federal Budget Balance.

Wednesday is also concise this week with Australia’s Westpac Consumer Sentiment, Euro-area’s Industrial Production, and US Retail Sales, Business Inventories, and Import Prices.

On the other hand, Thursday and Friday will be much busier. For Thursday, there are New Zealand’s Interest Rate Announcement,, Statement, and Press Conference; Australia’s Employment data; Switzerland’s Libor Rate and SNB Monetary Policy Assessment; ECB Monthly Bulletin; EU Economic Summit; Canada’s NHPI; US PPI, Unemployment Claims, and Current Account.

On Friday, there are New Zealand’s Business NZ Manufacturing Index; Switzerland’s PPI; Euro-area and US CPI; US Capacity Utilization Rate, TIC Long-term Purchases, Empire State Manufacturing Index, and Preliminary University of Michigan Consumer Sentiment.

Italy’s Elections and Eurozone Unemployment Rate Cause Euro Decrease

The electoral earthquake in Italy’s election last weekend resulted in a hung parliament as no single party held the majority after election results came out early this week.

The 5-Star Movement fought the more-established Democratic Party (PD) headed by Pier Luigi Bersani and the People of Freedom (PDL) party led by Silvio Berlusconi, and yet 5-Star surfaced as Italy’s largest party. Due to this result, 5-Star party leader Beppe Grillo fleshed out his party’s conditions to support a new government, namely changing the electoral law, cutting politicians’ expenses, and finally setting a two-term limit for Italy’s parliamentarians. Grillo went on to say that Italy is “overwhelmed, not by the euro, but by debt and expects another election in the next six months where he is confident that his party would emerge as a majority winner.

In other news, US CB Consumer Confidence, Pending Home Sales, New Home Sales, and Germany’s Retail Sales posted strong readings, while New Zealand Trade Balance, Italy and Euro-area Unemployment data disappointed with worse-than-expected figures. China’s Manufacturing PMI data grew less than expected and came in just a hair above the 50 borderline.

Commodities

Gold buyers did not make any progress this week as price is back down in the $1,500s after failing to conquer the $1,600 level. Buyers failed to follow through after price rose to $1,619 on Tuesday, and so the bears took over until Friday. This is a worrying sign for bulls; however, they can negate this by pressing price higher next week. Near-term target is $1,700.

Oil fared much worse than Gold this week, with the former’s price making a nearly $2 drop on Friday which almost breached the $90 level. The problem area for bulls came in at $94, and the rejection off this area on Monday was nasty and spelled the trend for the entire week. Bears have potentially unlock the potential for a journey to $83-$85.

Currencies

EURUSD witnessed a key down-week this week as sellers put the final nail in the coffin after 1.3300 held during the start of the week. Bears made a big downward push on Monday and price was unable to make a significant recovery since then. The pair stayed close to all-important 1.3000 level mid-week and it finally gave way on Friday, with price reaching as low as 1.2966 before the week ended. Bulls need to neutralize the momentum by taking price back above 1.3200 this coming week.

Not much happened in USDJPY this week as price remain engulfed between the 90 and 94 areas. The pair was stuck near the 92s during the first four days, but price managed to climb higher and ended the week in mid-93s. Wait-and-see mode if 94 gives way this time.

As predicted in the previous article, price did pursue the 1.5000 level and manage to breach it during Friday’s trading. The pair fell 235 pips to reach 1.4985 before settling back in the 1.5000s to close the week. It would be a surprise if bulls would be able to get price back up to 1.5300 in the new trading week, but in reality that is their critical task right now.

The Week Ahead

Monday’s news highlights come early with Australia’s Building Approvals, Company Operating Profits, ANZ Job Advertisements; Spain’s Unemployment Change; UK’s Construction PMI; Euro-area PPI; Eurogroup Meetings; and speeches by US FOMC’s Yellen and Powell.

On Tuesday, there are Australia’s Current account, Retail Sales, Interest rate announcement and RBA statement; UK BRC Retail Sales Monitor, Halifax HPI; Services PMI from Spain, Italy, UK, and Euro-area; ECOFIN Meetings; and US ISM Non-Manufacturing PMI.

Wednesday is relatively concise this week but nonetheless teeming with key news like Australia’s GDP; Bank of England Governor King’s speech; US ADP Non-Farm Employment Change, Beige Book, and Factory Orders; Bank of Canada Rate and Rate Statement, Ivey PMI.

On Thursday, there is a lot of news to digest, namely Australia’s Trade Balance; Japan’s Interest rate announcement and statement, BOJ Press Conference; SNB Chairman Jordan’s speech; BOE Rate Announcement and Statement; ECB Rate Announcement and Press Conference; Canada and US Trade Balance; and US Unemployment Claims.

Finally on Friday, there are Japan’s Final GDP and Current Account; China’s Trade Balance; Germany’s Industrial Production; Canada’s Employment data, Labor Productivity; and US Employment data.

Italians Vote; UK loses AAA Rating

Ratings agency Moody’s surprised the market on Friday with a downgrade of UK’s credit rating. UK was slapped with a downward revision to  AA1 from AAA. Moody’s expressed that the rating cut was attributed to the persistent weakness in the growth outlook and it expects “sluggish growth to extend into the second half of this decade.”

Italians walk to the polls today and tomorrow to decide their country’s fate and future. Italian voters would choose 615 members to comprise the Chamber of Duties, and another 315 member for the Senate. Italy is Euro-area’s third largest economy and the market is keen to monitor the results and potential after effects of the election results going forward. An inconclusive elections result could hurt the Euro as Italy desperately needs economic reform and stability. Key runners in this election are Pier Luigi Bersani, Mario Monti, and Silvio Berlusconi, with many favoring a Bersani win.

Commodities

It was another tough week for gold bulls as price descended further in the $1,550s. After price breached the $1,600 level, bulls were barely able to bring price back above it. Price action-wise, we could see the $1,526 12-month lows soon.

Oil finally succumbed to intense bear pressures this week, after bulls have been unable to maintain a hold of the $98 level for four straight weeks. The week started off with a drive higher towards the mid-$97 where the bears started to paw down on willing buyers. This somehow resulted to a domino down move breaking the $95 support area which held for nearly a month. Now, price is back down to prices reached in early January and price could still be enthusiastic enough to move towards the $90 level.

Currencies

EURUSD continued to press lower after an ascending channel, which coincides with the crucial support level at 1.3300, broke this week. Price declined by 160 pips and reached a 1.3144 low before a minor bounce on Friday. Price needs to trek higher toward 1.3300 in order for bulls to rectify the situation.

USDJPY finally settled down this week, after many weeks of over-enthusiasm from the buyers. The pair traded a mere 144 pips and traded inside last week’s range. Bulls must be worried as this is the third week that they were unable to close above the 94 level. Bears could launch a move to 92 soon.

GBPUSD bulls had a disastrous week as price 5 consecutive lower highs and fell 680 pips in 2 days. The break of the 1.5200 level and close at 1.5160 this week is extremely significant as this is the first in more than 2 years! Traders should not fight this trend and would be better off at the sidelines. Price could reach – and breach – the 1.5000 level any time soon.

The Week Ahead

Monday’s news highlights are China’s HSBC Flash Manufacturing PMI, the Italian Parliamentary election, and speeches from Bundesbank President Weidmann and Bank of Canada’s Carney.

On Tuesday, we will hear about New Zealand’s Inflation Expectations; speeches from RBA’s Debelle, UK MPC’s Bean, and Fed Chairman Bernanke; UK CBO Realized Sales, Canada’s S&P/CS Composite-20 HPI; US CB Consumer Confidence and New Home Sales.

Wednesday is again packed with a raft of news like New Zealand’s Trade Balance; Japan’s Retail Sales; Eurozone M3 Money Supply; KOF Economic Barometer; UK Second Estimate GDP; US Pending Home Sales, Durable Goods Orders; ECB Draghi’s speech.

On Thursday, New Zealand’s ANZ Business Confidence, Japan’s Preliminary Industrial Production; Australia’s Private Capital Expenditure; Switzerland’s GDP; Eurozone and Germany’s CPI; German Unemployment Change; Canada’s Current Account; US Unemployment Claims and Preliminary GDP.

Finally on Friday, there are Japan National and Tokyo Core CPI, Capital Spending and Household Spending; China, Spain, Italy, UK, and Eurozone Manufacturing PMI; Eurozone Unemployment Rate; Canada GDP; US Personal Spending, Core PCE Price Index, and ISM Manufacturing PMI.

G-20 Meetings Focused on Currencies; BOJ Retains Rates

Finance heads of 20 advanced nations, or the G-20, have recently congregated to discuss pressing global issues. The two-day meeting concluded in Moscow on Saturday with particular attention put on the currency market. G-20 finance ministers took a hard line on currencies without mentioning any particular country and expressed concerns about governments making efforts to influence exchange rates. According to one notable statement, G-20 promised “not to target our exchange rates for competitive purposes.” Japan has been criticized by several analysts and officials for driving down Yen, as Prime Minister Abe is keen on employing looser monetary policy to fight deflation. Bank of Japan Governor Shirakawa, however, said yesterday that the G-20 communique is “absolutely in the same spirit as our monetary policy.”

Several key central banks have announced interest rates and policy decisions in the last three weeks, and this week it was Bank of Japan’s turn. BOJ retained its overnight call rate at the range of 0 and 0.1 percent. Bank of Japan made known that growing signs of improvement in advanced economies are present but they remain cautious at the same time.

Commodities

As expected, gold has made a decisive move this week, slamming price $72 down to break out of the consolidation. This is its biggest weekly range move in more than 6 months and traders could be in for something here. Gold fell below the $1,600 level for the first time since around August as recent data out of China and the US are showing signs of economic recovery, prompting a reduced demand for gold as a haven. The next area of contention on the downside would come in around the lower $1,500s.

Oil also made a significant move this week after buyers failed to prop demand above the $98 level. Sellers brought price back down toward the low-$95s on Friday and closed the week just under the $96 level. Friday’s $2+ daily move was its biggest since late December, and bears seem keen on keeping a lid on prices in the coming weeks. It would be interesting to see if bears would be able to reach the $90-$93 area soon. Oil has declined because of concerns that fuel demand may weaken, after reports of weak US and Euro-area data, particularly US industrial output and Eurozone exports.

Currencies

EURUSD made progress in the first three days of the week as price made new highs throughout. However, the ongoing development halted after buyers hit a roadblock above 1.3500; that is when price spiraled back down and created new weekly lows. 1.3350 gave way in the process and price ended the week at 1.3360. More buyers should support price and bring it back up above 1.3400 this coming week to negate any developing bear momentum.

USDJPY resumed its upmove this week and went on to create new highs. The pair hit a new high of 94.45 at the start of the trading week, but price action waned for the rest of the week. Price is getting heavier and sellers kept a lid on price at 93.80 for the last three days. Buyers must maintain their enthusiasm moving forward, otherwise bears would jump in to control price action and send it back toward the 90 level.

It was practically a one-way trading for GBPUSD this entire week as the 1.5600 fortress gave way to insurmountable bear strength. In the fundamental front, BOE Governor King said the nation faces “big challenges” and inflation is expected to remain above the 2 percent target despite possibility of weak growth moving forward. Confederation of British Industry also lowered its expectation of growth for 2013.

The Week Ahead

The week will start out with another quiet Monday, and the only notable news releases are Australia’s New Motor Vehicle Sales for January, China Foreign Direct Investment, Euro-area Current Account, and ECB President Draghi’s speech. US banks are closed to commemorate President’s Day (Washington’s birthday).

Tuesday will provide more action in the form of Monetary Policy Meeting Minutes from the BOJ and RBA, Germany and Euro-area ZEW Economic Sentiment, Canada’s Foreign Securities Purchases and Wholesale Sales, and US Mortgage Delinquencies.

On Wednesday, there are New Zealand’s PPI Input and Output, and speech from RBNZ Governor Wheeler; Australia’s CB and MI Leading Index and Wage Price Index; Japan’s Trade Balance and All Industries Activity; German PPI, and CPI from Germany and France; UK Claimant Count Change, Unemployment Rate, MPC Policy Meeting Minutes, and Average Earnings Index; Switzerland’s ZEW Economic Expectations Survey; US PPI, Building Permits, Housing Starts, Fed’s Meeting Minutes.

Thursday’s action begins in the European session with Switzerland Trade balance; Flash Manufacturing PMI and Flash Services PMI for Euro-area, France, and Germany; UK CB Industrial Order Expectations, Public Sector Net Borrowing; 10-year bond auctions for Spain, UK, and France; US Unemployment Claims, CPI, Philly Fed Manufacturing Index, Flash Manufacturing PM, crude oil inventories, Existing Home Sales, and speech from Fed’s Bullard.

Friday will remain active with RBA Governor Stevens’ speech; New Zealand Credit Card spending; Italy Retail Sales; Germany’s Final GDP and Ifo Business Climate; Canada’s CPI and Retail Sales data; Belgium NBB Business Climate; and US FOMC member Powell’s and Tarullo’s speech.

Favorable US Data Welcomes February

The second week of central bank interest rate decisions has ensued. Both the Reserve Bank of New Zealand and US Federal Reserve maintained their rates at 2.50 percent and less than 0.25 percent, respectively. A few more central banks will make their announcements this coming week.

On Tuesday, New Zealand’s Trade Balance report showed the country created a $486 million trade surplus back in December, its largest export percentage-based December surplus since December 1991.

On Wednesday, S&P/Case-Shiller House Price Index matched median projection for a 5.5 percent climb. This was another favorable indication for the US housing market, brought on by mortgage rates being near its record low.

Spain and Japan published disappointing data this week. Japan’s published weak readings in Retail Sales, Preliminary Industrial Production, Average Cash Earnings, and Housing Starts. Contraction was reported in manufacturing output, employment, and new orders in Japan. For Spain, recession has deepened further as evidenced by the 0.7 percent decline in Gross Domestic Product for the December quarter of 2012, according to the Spanish National Statistics Institute. Spain’s manufacturing PMI climbed to 46.1 but output and jobs continued to be cut, a Markit report showed. On the bright side, the Spanish export sector has been giving positive readings lately.

Friday’s US Non-Farm Employment Change had its actual figure miss economists’ expectations, but the silver lining came from a much better revised reading for January to 196,000. Revised University of Michigan Consumer Sentiment, Construction Spending, and ISM Manufacturing PMI also reported survey-beating figures.

Commodities

It was another rough week for gold. Price bounced around a $30 area between $1,650 and $1,680 for a third consecutive week, indicating unwillingness of each side to make decisive moves at this point. The weekly close has a slight bearish tone and we could see a move back to the lower-$1,600s next week. Bulls have to exert more and make a decisive trek back to the $1,700 level.

Oil traders have more to celebrate this week. Despite the easing that happened in the last three trading days, oil has made a bullish weekly close for eight consecutive weeks. The next area of contention remains at the $98-$100 area. Friday’s move back toward $96.50 should be kept in mind, though.

Currencies

EURUSD’s Friday resistance at the 1.3470s kept a lid on prices this week, albeit temporarily. Once price overcame this level on Tuesday, it carved a relatively smooth move higher. The pair reached a 1.3710 high after a nasty whipsaw which fleetingly brought price back to the area of the weekly open. Now, Euro is on track to proceed higher to its near-term ultimate target area of 1.4000 – 1.4500. A retracement back to 1.3400 – 1.3600 cannot be ruled out.

USDJPY consolidated during the first three days of this week, bouncing around and trading within Friday’s daily range. On Thursday, price ticked higher and reached fresh highs which continued on Friday, reaching another record high and came close to touching the 93.00 level. There is not much in the way of bulls to reach their next target, the 95.00 handle. However, any dips at this point would not be surprising.

Throughout this week, GBPUSD buyers made a concerted effort to bring price back toward the all-important 1.6000 level. Given the bearish environment, they only managed to push price 200 pips higher. Buyers were unable to reach and break above 1.5900, so bears took advantage and sent price tumbling back to the week’s lows in less than one day. Friday’s daily and weekly close below 1.5700 is definitely a bad sign and bulls should really stay out. The 1.5200 – 1.5500 area now comes back in the frame.

The Week Ahead

Monday opens the week with key releases such as Australia’s Building Permits; UK Halifax House Prices and PMI Construction; Spain’s Unemployment Change, Euro-area Sentix Investor Confidence, and PPI; and US Factory Orders.

On Tuesday, the market will watch for New Zealand’s Labour Cost Index; Australia’s House Price Index, Trade Balance, Reserve Bank of Australia Interest Rate Decision and Rate Statement; China’s HSBC China Services PMI; Switzerland’s Exports, Imports, and Trade Balance data; Markit Services PMI for Euro-area, Spain, Germany, France, UK, and Italy; Italy’s CPI; Euro-area Retail Sales; US Redbook Index, ISM Non-Manufacturing PMI, and IBD/TIPP Economic Optimism.

On Wednesday, New Zealand celebrates Waitangi Day. Notable economic release during the Asian session will be Australia’s Retail sales data. Later on, there is Germany’s Factory Orders, Canada’s Ivey PMI, and US EIA Crude Oil Stocks change.

Thursday is the most news-packed with Australia and New Zealand’s Employment Change and Unemployment Rate; Australia’s AiG Performance of Construction Index; Japan’s Foreign Bond Investment, Foreign Investment in Japan Stocks, Leading Economic Index, and Machinery Orders; European Council Meeting; Switzerland’s SECO Consumer Climate and Foreign Currency Reserves; France’s Trade Balance, Imports, and Exports; Spain’s Industrial Output; UK Trade Balance, Manufacturing Production, and Industrial Production; European Commission’s Economic Growth Forecasts; Germany’s Industrial Production; BOE’s Rate Decision and Asset Purchase Facility; ECB’s Rate Decision, Monetary Policy Statement, and press conference; Canada’s Building Permits and New Housing Price Index; US Consumer Credit Change and Initial Jobless Claims.

Friday closes the week with a raft of economic releases: Japan’s Bank Lending, Current Account, Eco Watchers Survey and Trade Balance; European Council Meeting (second day); China’s CPI, PPI, Exports, Imports, and Trade Balance; Switzerland’s Unemployment Rate and Real Retail Sales; Germany Harmonised Index of Consumer Prices, Imports, Exports,  Current Account, Trade Balance; France’s Budget; Italy’s Industrial Output; UK 10-year bond auction; Greece CPI and Industrial Production; Canada’s Net Change in Employment, Participation Rate, Housing Starts, and International Merchandise Trade; US Wholesale Inventories and Trade Balance.

On Saturday, New Zealand will publish the REINZ House Price Index.

Optimism Reigns in WEF; Germany, UK, China Data Surprises

There are signs of optimism everywhere and January is starting off the year with much of it.

Business leaders and key government and organization officials trekked to Davos, Switzerland for the annual meeting of the World Economic Forum. This year, the WEF was spread across five days and it concludes today, January 27. In general, the ‘crisis mood’ is over and there was a general sense of optimism. However, top officials were quick to caution that the right policy actions should be made and pursued to further the global economic recovery. “Do not relax,” was one of International Monetary Fund chief Christine Lagarde’s parting words in a WEF closing panel.

Meanwhile, ECB chief Mario Draghi opined the worst of the debt crisis in the Eurozone may be over, and said in a Frankfurt-held speech that the “darkest clouds” have subsided, which he attributed to the decisive policy-related actions made. “We can begin 2013 on a more confident note,” Draghi said.

Notable economic data developments include Germany’s ZEW report of a robust rise of 31.5 in its ZEW Economic Sentiment data for January, much stronger than the 12.2 forecast and is about four-fold of the prior month’s reading. This comes after negative readings from June to November and is the highest reading since May 2010’s 45.8. Euro-area’s ZEW Economic Sentiment also came in stronger at 31.2 versus 14.1 forecast.

UK’s Claimant Count Change data for December also came in with a surprise fall of 12,100, which makes it the lowest jobless claims reading since mid-2011. This rare display of economic strength will be monitored in the coming months to see whether it was a minor blip or the start of a favorable economic trend.

A handful of other key data displayed notable positive readings, such as Germany’s Ifo Business Climate, Flash Manufacturing PMI and Services PMI; US Unemployment Claims; Euro-area Current Account; and US Flash Manufacturing PMI. China’s HSBC Flash Manufacturing PMI also reached a two-year high for its January data.

Commodities

Gold continued to range until the midweek before swooning lower to end the week at $1,658. The $1,700 bear defense had been successful and now all eyes are on the $1,600-50 area. If the $1,650 support breaks down, they will target January’s five-month low at $1,625.

Oil trading on Monday was as quiet as it can get when it traded a mere $0.45 range after trading an equally tight $0.76 trading range on Friday. All these came after price vaulted above the $94.87 resistance last week and rose to the mid-$96.00s. It ended this week with its seventh consecutive weekly gain, its best run in nearly four years. If the upmove persists in to the coming weeks, the next area of contention will come in at the $98-$100 area. Continued economic optimism will prop up black gold.

Currencies

EURUSD started off the week with an uncharacteristic 32 pip trading range on Monday. The subsequent two days remained confined to the broader 1.3260 – 1.3400 range set on January 11. Price action change on Thursday as price managed to close the day just below 1.3400 and it made a follow-through upmove, and succeeded in breaking toward new highs to end the week at 1.3461, ahead of a 1.3478 top which is just 7 pips shy of pushing for a 13-month high. Bulls are still keen on pressing price higher to the 1.3500 and 1.3600 levels.

USDJPY traders were able to set two milestones this week: a daily and weekly close above the 90.00 level for the first time in more than two years. Traders need to recall that price set off a precipitous fall when price fell below the 90 level back in 23 June 2010, which pressured price down to a 75.56 low on October 2011.

GBPUSD continued to weaken after price fell below the all-important 1.6000 level and the 200-day moving average found at 1.5903. Price made back-to-back new lows on Thursday and Friday, after the three-day consolidation which started on Monday broke down and bulls succumbed to intense bear pressure. The fall on Friday conquers the five-month low for Cable, and the last bastion of support for bulls now comes at the 1.5700-50 area. A break of this level will descend price into a potential chaotic fall into the 1.5300-1.5500 lows.

The Week Ahead

Monday opens the week with only a few key releases from the US – Durable Goods Orders and Pending Home Sales. The soon-outgoing Bank of Canada Governor Mark Carney will also impart a speech in Zurich.

On Tuesday, the market will watch for New Zealand’s Trade Balance data, Australia’s CB Leading Index, NAB Business Confidence, Gfk German Consumer Climate, US S&P/Case-Shiller Composite-20 House Price Index and US Consumer Confidence.

On Wednesday, there are Japan’s Retail Sales, Switzerland’s KOF Economic Barometer, Spain’s Flash Quarterly GDP, Euro-area Retail PMI, UK’s Net Lending to Individuals data, and Italy’s 10-year bond auction. US will also release ADP Non-Farm Employment Change, Advance GDP, crude oil inventories, Federal Funds Rate, and FOMC Statement. Germany’s Bundesbank President Weidmann will also give a speech.

On Thursday, New Zealand will announce its Official Cash Rate and Rate Statement. Other news releases include Japan’s Manufacturing PMI, Average Cash Earnings, and preliminary Industrial Production; UK’s Gfk Consumer Confidence and Nationwide HPI; Australia’s HIA New Home Sales, Import Prices, and Private Sector Credit; Germany’s Retail Sales, Unemployment Change, and preliminary CPI; France’s Consumer Spending; Canada’s GDP, RMPI, IPPI; and US Unemployment Claims, Core PCE Price Index, Employment Cost Index, Chicago PMI, Personal Spending, and Personal Income.

February starts this Friday with a host of releases: Japan’s Household Spending and Unemployment Rate; Australia’s PPI; China’s Manufacturing PMI and HSBC Final Manufacturing PMI; Switzerland SVME PMI; Euro-area, Spain, Italy, UK Manufacturing PMI; Euro-area CPI and Unemployment Rate. The US will also release Unemployment Rate, Non-Farm Employment Change, Average Hourly Earnings, Final and ISM Manufacturing PMI, Construction Spending, Revised University of Michigan Consumer Sentiment.