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Bank of England Leaves Interest Rate at 0.5%

The Bank of England’s Monetary Policy Committee, through its meeting minutes, declared on Wednesday that all of the nine Committee members decided to keep the Official Bank Rate and Asset Purchase Facility at the same rate, 0.50 percent and GBP375 billion, respectively. The Committee noted that the economy is in the path of sustained recovery and is at no significant risk of inflation hence the bank does not foresee any urgency in terms of raising interest rates.

In the same light, the US Federal Open Market Committee decided to keep the same pace of its asset purchase program ($85 billion per month, $45 billion per month of which is for purchases of Treasuries). QE tapering could be seen “in the coming months,” but the FOMC noted that the pace of asset purchases would continue to be appropriate for as long as the inflation and unemployment thresholds are not breached.

The us Department of Labor reported on Thursday that the prior week’s Unemployment Claims declined to 323,000, its lowest in seven weeks. Flash Manufacturing PMI rose to 54.3 after posting 51.8 on October. However, Philly Fed Manufacturing Index sunk to 6.5, the lowest reading in the last six months.

Commodities

Gold resumed its downhill move after making a brief pause just below the $1,300 level in the prior week. It was pretty much all about the bears this week starting Monday as bulls failed to even make a short revisit to $1,300. Price has now reached a near-five month low, and we expect the same thing next week if Gold cannot recover back above $1,300.

Oil continued to struggle around $95 this week. Price has been plowing through the same tight range ($92.50-$95.50) for 14 straight trading days, but we suspect that we will see some developments in the very near future. Tough support is seen below $95, so we could see a move toward $100 next week.

Currency Pairs

Though the trading range has been somewhat average, EURUSD traders had a volatile week particularly in the last three days after price whipsawed on either side of 1.3400. Large selling in the upper-1.3500s took price down briefly through 1.3400 on Wednesday, but buyers were quick to scoop up and absorb selling. If what we saw was serious buying, we could see the pair trading back in the 1.3600s again.

Price action-wise, GBPUSD performed better than EURUSD this week as the former was able to close in on its own October resistance area in the 1.6250s. If EURGBP breaks down further next week, we could see GBPUSD punch through 1.6250 easily.

USDJPY went on to create its fourth consecutive bullish weekly close after bulls triumphed in conquering 100 and 101, confidently closing above the latter on Friday. The only thing that blocks the way toward May 22’s 103.70 high is the early July high of 101.52.

The Week Ahead

Asia will be quiet for a second consecutive Monday. The European session will start off with

Switzerland’s Employment Level data, followed shortly by the UK’s BBA Mortgage Approvals, and later on by the US Pending Home Sales.

On Tuesday, the Bank of Japan will release its latest Monetary Policy Meeting Minutes. Then the UK will provide the Inflation Report Hearings, succeeded by a raft of US data which includes Housing Starts, Building Permits, S&P/CS Composite-20 HPI, and CB Consumer Confidence.

Wednesday will start very early with New Zealand’s Trade Balance data. Australia will follow a few hours later with Construction Work Done; Germany’s Gfk Consumer Climate; UK’s Second Estimate GDP, Preliminary Business Investment, and CBI Realized Sales; US Durable Goods Orders, Jobless Claims, Chicago PMI, and Revised UoM Consumer Sentiment.

On Thursday, activity will be relatively even throughout the day with Japan’s Retail Sales; ANZ Business Confidence; Australia’s Private Capital Expenditure and HIA New Home Sales; Switzerland’s GDP; Germany’s Preliminary CPI and Unemployment Change; BOE Carney’s speech and BOE Financial Stability Report; Canada’s Current Account, IPPI, and RMPI. The United States, meanwhile, will celebrate Thanksgiving Day.

Finally, Friday will end the week with New Zealand’s Building Consents; Japan’s Household Spending, Tokyo Core CPI, and Preliminary Industrial Production; Australia’s Private Sector Credit; Germany’s Retail Sales; Switzerland’s KOF Economic Barometer; UK’s Net Lending to Individuals; Eurozone CPI Flash Estimate and Jobless Rate; and Canada’s GDP.

US Shutdown Continues, Yellen New Federal Reserve Chairman

US shutdown enters its third week and it seems that there is no solution in sight. The US senate will now have to expedite the efforts to find a solution to the crisis before the US government reaches its debt ceiling.

In other US news, President Obama chose Janet Yellen to succeed Ben Bernanke as Federal Reserve Chairman. She is expected to maintain the current expansionary policies implemented by the Fed.

US Jobless Claims came in worse than expected, based on the prior week’s data from the Department of Labor. Jobless Claims ballooned by 66,000 to 374,000 and was attributed to the current US government shutdown and a computer system-related backlog in California.

The preliminary University of Michigan Consumer Sentiment dropped to 75.2 in October, the lowest reading since January’s 71.3 reading.

Bank of England decided on Thursday to leave its Official Bank Rate unchanged at 0.50 percent, and its Asset Purchase Facility at GBP375 billion.

UK Manufacturing Production surprisingly contracted 1.2 percent, the most in nearly a year according to the Office for National Statistics on Wednesday. Meanwhile, trade deficit came in more than expected, GBP9.6 billion.

In Canada, a very weak Building Permits figure was reported by Statistics Canada last Monday. Permits sank 21.2 percent on August, falling from the record 21.4 percent gain registered in July. Trade deficit increased slightly to CAD1.3 billion. Meanwhile, Employment Change climbed less than expected, 11,900 (versus 15,300 forecast). On the other hand, Unemployment Rate improved to the lowest in nearly five years, 6.9 percent from the August reading of 7.1 percent.

Commodities

Gold displayed signs of bullish fatigue early this week. Bears took notice and tore down all buying above the $1,300, and bulls quickly retreated. This resulted in four straight days of selling until Friday, pulling price down to its lowest in four months. The risk now is for a move towards the 2013 low (also the three-year low) at $1,180.

Oil has now declined in four out of five weeks and this is bad news for bulls who’ve been trying to aim for a move back toward $110. Just like Gold bulls, Oil bulls struggled on the topside and this paved the way for bears to aim for lower prices, which they succeeded in doing. A sustained break of the $100 level could prove more disastrous.

Currency Pairs

Looking at the weekly chart, EURUSD has been trading close to the 1.3500 level for three weeks now. Bulls must be able to print a strong weekly close at/or above 1.3600-1.3700 to maintain the momentum on their side.

In a matter of a few weeks, GBPUSD has gone from a leader to one of the laggards of the major pairs. Bulls failed close strongly above the 1.6200 level during the prior week, and this opened up the possibility for downside attacks this week. Coupled by a spate of weak UK data, the pair closed the week below 1.6000, a serious indication that bears are increasing their control. If 1.6000 will not be recovered quickly, we could see 1.5600-1.5800 soon.

Thanks to the latest recovery in the Dollar, USDJPY gained considerably this week after playing with fire with the ascending trendline discussed in the previous week. It won’t be smooth-sailing for bulls as they have to contend with sellers around 99.00-100.00.

The Week Ahead

This Monday, we will witness the release of Australia’s Home Loans; China’s New Loans, PPI, and CPI; Switzerland’s PPI; and Eurozone’s Industrial Production. The United States will observe Columbus Day, while Canada will celebrate Thanksgiving Day.

The Reserve Bank of Australia will kick off Tuesday with the disclosure of the latest Monetary Policy Meeting Minutes. This will be followed by UK’s PPI, RPI, and CPI; Eurozone’s and Germany’s ZEW Economic Sentiment; and US Empire State Manufacturing Index.

Economic data release on Wednesday will start very early with New Zealand’s Consumer Price Index. Then, this will be succeeded by UK’s Unemployment Rate, Average Earnings Index, and Claimant Count Change; Eurozone CPI; Canada’s Manufacturing Sales; and US Beige Book.

Thursday would be a rather short news day this week with Australia’s NAB Quarterly Business Confidence; Eurozone Current Account; UK Retail Sales; Canada’s Foreign Securities Purchases; and US Jobless Claims and Philly Fed Manufacturing Index.

Friday will also be a short one with RBA Governor Stevens’ speech; China’s Industrial Production, Gross Domestic Product, and Fixed Asset Investment; BOJ Governor Kuroda’s speech; and Canada’s CPI.

Interest Rates Unchanged, US Government Shutdown

The main news item in the previous week was undoubtedly the US government shutdown. It is impacting the US economy and the global economy alike.

Two central banks announced their latest interest rates this week. The European Central Bank and Reserve Bank of Australia both held their respective benchmark interest rates unchanged at 0.50 percent and 2.50 percent, respectively.

In Japan, Household Spending surprisingly declined 1.6 percent. Meanwhile, the third quarter Tankan Manufacturing Index rose sharply to 12, beating its forecast for an advance to 7.

In Australia, Building Approvals declined more than expected in August, contracting 4.7 percent versus an expectation for a 0.7 percent decline. Trade Balance for August showed a –AUD0.82 billion deficit.

In the United States, a mixed slew of economic data were reported this week. US Unemployment Claims increased 308,000 (less than expected); Chicago PMI rose to 55.7 in September (versus August’s 53.0); ISM Manufacturing PMI climbed to 56.2, while ISM Non-Manufacturing PMI declined in September to 54.4 from 58.6 the previous month; and US ADP Non-Farm Employment Change increased less than expected (166,000). The Non-Farm payroll report was absent this Friday due to the US government shutdown.

Commodities

Now that the week is over, we could see that the prior week was just a pause from the prevailing downtrend in Gold. Buyers attempted on Monday to rally price through the $1,350s but easily failed. This gave sellers the chance to control the market the entire week. The move toward $1,277 could be a prelude to what will come next week.

It was a completely different story for Oil. After three consecutive weekly declines, Oil made its first weekly advance after nearly breaking $101 on Monday and Tuesday. Buyers need to go through a thick forest of resistance around $105-$108.

Currency Pairs

EURUSD broke new ground this week after hesitating in the mid-13500s for two weeks. The pair is moving closer to breaking its 2013 highs at 1.3710 which was posted in late-January. If the pair can push higher further next week, and then we could see new highs sometime before the current year closes.

A huge reversal ended the week for GBPUSD, after reaching a new 2013 high of 1.6259 last Tuesday. 1.6000 is back in the hot seat and we could see a good battle happen in this area next week.

USDJPY bearishness remains prevalent despite attempts break higher through the 98.00s. The up-trendline extending all the way from February remains at risk of breaking. A big move could arise if this trendline gives way.

The Week Ahead

The most significant issue this week will be the US government shutdown. This issue has a huge impact on the American and global economies and the markets are deeply affected by it.

This Monday, a significant number of Australian banks will observe Labor Day. However, the Australian Industry Group will release its Construction Index. Japan will have BOJ Monthly Report and Leading Indicators, while Switzerland will release Foreign Currency Reserves. Meanwhile, Canada will issue the latest Building Permits report.

New Zealand will open up Tuesday with NZIER Business Confidence, followed by UK BRC Retail Sales Monitor; Japan’s Current Account; Australia’s NAB Business Confidence and ANZ job Advertisements; Germany’s Factory Trade Balance; Switzerland’s Retail Sales and CPI; and Canada’s Trade Balance.

On Wednesday, there will be Australia’s Westpac Consumer Sentiment; Japan’s BOJ Monetary Policy Meeting Minutes; UK Trade Balance, NIESR GDP Estimate, and Manufacturing Production; and US FOMC Meeting Minutes.

On Thursday, there will be Business NZ Manufacturing Index; Japan’s Tertiary Industry Activity and Core Machinery Orders; Australia’s MI Inflation Expectations, Unemployment Rate, and Employment Change; China’s New Loans; ECB Monthly Bulletin; UK Interest Rate Announcement and Statement; Canada’s NHPI; and US Jobless Claims.

On Friday, the market will only have a few key economic data to look at, mainly jobs reports from the United States and Canada.

Bank of England Confident in The Country’s Economic Recovery

After the release of the Bank of England’s Monetary Policy Committee Meeting Minutes in the prior week, news wires broadcasted on early Thursday that BOE Chief Carney does not find a reason to provide more QE, given that the economic recovery has “strengthened and broadened.”

In other news, New Zealand’s statistics agency revealed last Wednesday that the Trade Balance weakened further and more than expected in August. The trade deficit ballooned to NZD1.191 billion. This is the worst trade deficit since late-2008.

In the UK, CBI Realized Sales soared to 34 in September. Analysts were upbeat but were only expecting 24. Meanwhile, Current Account was weaker than expected at –GBP13 billion.

In the United States, Unemployment Claims continued to beat its forecast for the fourth consecutive week (305,000 versus 319,000 forecast).

US Pending Home Sales declined more than expected in August, according to the National Association of Realtor’s latest report. Sales declined 1.6 percent (analysts expected a 0.9 percent decline).

The Revised University of Michigan Consumer Sentiment posted its second straight reading below the 80-level, 77.5.

Commodities

Not much happened in Gold this week and there are signs of a possible move back into the $1,400s. Gold bulls successfully defended the $1,300 for five straight days, and this means they got a tiny headstart for next week’s trading. Before they get too complacent, they must strike down potential sellers at and ahead of the $1,400 level. A break of $1,430 is the upside target.

Oil was a different story as price was down for the third straight week. The weekly close below $103 was a strong statement against bears, and they should gear up for next week. There is still time for them to shore up price back into the $105s. That’s their goal for this coming week.

Currency Pairs

EURUSD has been very quiet this week. In fact, its 101-pip weekly trading range is one of the lowest in many weeks. This pair lags behind GBPUSD but is still poised to move higher if it can make a good close above 1.3600.

GBPUSD went on to complete its fourth straight bullish week, closing comfortably above the 1.6100 level for the first time since early January. Bulls are looking for a break through 1.6400 in the coming weeks.

USDJPY’s 127-pip weekly range was not enough to break out of the prior week’s range. The pair continues to find problems moving away from 98 and reaching the 100.00 level. Price action-wise, the chart looks ugly and we could see 95-96 soon.

The Week Ahead

The brand new week ushers in the month of October starting on Tuesday.

On Monday, the market will have relatively fewer economic releases to look at compared to previous end-of-month days. New Zealand will have Building Consents. This will be followed by Japan’s Retail Sales and Preliminary Industrial Production; ANZ Business Confidence; Australia’s Private Sector Credit; China’s HSBC Final Manufacturing PMI; Germany’s Retail Sales; UK Net Lending to Individuals; Eurozone CPI Flash Estimate; Canada’s GDP; and US Chicago PMI.

Japan will open up Tuesday with Household Spending and Tankan Indices. China will observe National Day but Manufacturing PMI will be out. Other news include Australia’s Retail Sales, Interest Rate Announcement and Statement; Spain’s Manufacturing PMI; Germany’s Unemployment Change; and US ISM Manufacturing PMI.

On Wednesday, there will be Australia’s Trade Balance and Building Approvals; UK Construction PMI and Halifax HPI; ECB’s Interest Rate Announcement and press conference; and US ADP Non-Farm Employment Change.

On Thursday, worthy news to watch out for come in the form of China’s Non-Manufacturing PMI; Italy, UK, and Spain Services PMI; Eurozone Retail Sales; US Jobless Claims, Factory Orders, and ISM Non- Manufacturing PMI.

On Friday, the market will only have a couple of key economic data to look at, particularly BOJ’s Monetary Policy Statement and press conference; Germany’s PPI; and US Non-Farm Employment Change, Jobless Rate; and Canada’s Ivey PMI.

Central Banks Held Rates Steady, US Jobs Data Mixed

It was a very busy week as four central banks made interest rate announcements. The Reserve Bank of Australia, Bank of Canada, Bank of England, and the European Central Bank all maintained their respective rates. RBA’s Cash Rate was held at 2.50 percent, BOC held its Overnight Rate at 1 percent, while both ECB and BOE held rates at 0.50 percent. BOE’s Asset Purchase Facility was also maintained at GBP375 billion.

The UK had quite a stellar week as Manufacturing PMI, Construction PMI, and Services PMI topped their respective estimates (57.2, 59.1, and 60.5, respectively).

US Non-Farm Employment Change missed expectations for its August reading, increasing 169,000 compared to its 178,000 estimate. August Unemployment Rate improved slightly to 7.3 percent, according to the Bureau of Labor Statistics.

Meanwhile, Canada’s Employment Change increased 59,200 in August, while the Unemployment Rate also improved, from 7.2 percent to 7.1 percent. Ivey PMI jumped to 51.0 from 48.4 in the previous month.

Commodities

Gold’s $1,400 level has been pivotal in this week’s trading, but in the end bears were able to close the week slightly on their side. Next week, focus will remain on whether the level can put a lid on price. Near-term areas to watch are $1,350 and $1,430-50.

Oil had another volatile week, and like last week bulls had the upper hand. Unlike the other week, though, bulls completely dominated in this week’s trading, making deep discount buys since early Monday and pushing price upward through $110. In the process, weekly price closed at the highest level since May 2011. It would be fascinating to see whether bulls can continue the momentum next week.

Currencies

EURUSD weakness persisted this week but bears had trouble getting through the 1.3100 level. The pair bounced on Friday but it was not enough to reverse the weekly decline. Key areas to watch next week are 1.3000-1.31000 and 1.3300.

The downside trendline capping USDJPY since May has been duly broken this week. But after the brief excursion above 100.00, the pair has been slammed down very hard on Friday. Price reached a 98.53 low before it was able to close the week just above 99.00. Bulls should make another attempt at closing above 100.00 next week.

GBPUSD had a pretty smooth ride upward, thanks to several favorable data released this week. The steady climbed started near 1.5500 and the pair rose all the way up through 1.5650, topping just ahead of 1.5700. The August top at 1.5716 is looming and bulls should try to blast through it this coming week.

The Week Ahead

The second week of September will turn out to be evenly busy.

On Monday, watch out for Japan’s Current Account and Final GDP; Australia’s Job Advertisements and Home Loans; China’s PPI, CPI and New Loans; Switzerland’s Retail Sales; and Canada’s Building Permits.

On Tuesday, traders will keep an eye on Japan’s Monetary Policy Meeting Minutes and Tertiary Industry Activity; Australia’s NAB Business Confidence and MI Inflation Expectations; China’s Industrial Production and Fixed Asset Investment; BOE Credit Conditions Survey; US JOLTS Job Openings.

On Wednesday, there will be Japan’s BSI Manufacturing Index; Australia’s Westpac Consumer Sentiment; UK Claimant Count Change and Unemployment Rate.

On Thursday, RBNZ will have its Rate Announcement and Monetary Policy Statement. Other noteworthy releases include Japan’s Core Machinery Orders; Australia’s Jobs data; ECB Monthly Bulletin; UK’s Inflation Report Hearings; US Unemployment Claims and Import Prices.

Friday ends the week with New Zealand’s Business NZ Manufacturing Index; Switzerland’s PPI; ECOFIN Meetings and Eurogroup Meetings; US Retail Sales, PPI, and Preliminary UoM Consumer Sentiment.

Raft of Economic Data Ends the Month of August

The final week of August started out very quietly but this all changed as the week wore on.

Orders for US Durable Goods tumbled greater than estimated after three continued monthly advances. Purchase orders for durable goods fell 7.3 percent in July led by capital goods and aircraft, according to the Census Bureau. Core Durable Goods Orders eased for the second month at minus 0.6 percent.

US CB Consumer Confidence climbed to 81.5 in August from last month’s 81.0 reading. This is the third index reading above the 80 level.

US Pending Home Sales contracted, according to the latest report from the National Association of Realtors. Pending sales of existing homes declined 1.3 percent in July, a greater decline than forecast. The rise in mortgage rates is causing concern, putting pressure on Pending Home Sales which has now declined for the second month.

The US economy grew more than expected in the second quarter of this year, the Bureau of Economic Analysis said on Thursday. Preliminary Gross Domestic Product advanced 2.5 percent, compared to the median estimate of 2.2 percent.

US Core PCE Price Index, Personal Spending, and Personal Income all came in at 0.1 percent in July. All were also below their respective forecasts.

In other news, Private Capital Expenditure in Australia surged 4.0 percent (seasonally adjusted) in the June quarter 2013. This puts it back in the black after capital expenditure of private business slumped 4.1 percent in the first quarter of this year.

Meanwhile, in the United Kingdom, the Confederation of British Industry reported Wednesday that CBI Realized Sales jumped to 27 in August, following July’s equally-impressive advance to 17.

Commodities

Bullish momentum in Gold fizzled out as the week progressed. Gold advanced for five days since August 22, but the fifth day saw a marked about-face after price met sellers around the $,1420-50 area. From there, it was all downhill until the Friday close, when bulls had still attempted to print a weekly close above $1,400—but failed. Next week, bulls should strive for a move back up; otherwise, expect $1,350-80 or even lower.

Oil became active and perky this week as news and speculation about a potential attack on Syria has been doing the rounds throughout the internet. From $105.80s on Tuesday, price shot up past $112 before closing the day in the mid-$109s. Expect further volatility in the coming days or weeks.

Currencies

EURUSD failed to capitalize on the recent consolidation this week and slipped through 1.3300 and even 1.3200 before New York closed on Friday. If bearish momentum continues next week, the pair will target the 1.3100 level, ahead of which is where the 200-day MA lies.

USDJPY remained range-bound below the 99.00 level for a fourth straight week. Risk aversion in relation to the potential attack on Syria could provide a lift to JPY in the following weeks. Trading range has tightened up further; hence expect a burst of volatility soon.

Despite a bullish close on Monday, it was all downhill for GBPUSD throughout this week after bulls failed to make price close above 1.5600 since Thursday. Next week, bulls need to move it back above 1.5600 so they can attack stops toward a break of 1.5700.

The Week Ahead

The start of the new month sees a barrage of economic data this week.

On Monday, there will be New Zealand Overseas Trade Index; Japan’s Capital Spending; Australia’s Building Approvals and Company Operating Profits; China’s HSBC Final Manufacturing PMI; Spain’s, UK’s, and Italy’s Manufacturing PMI; Switzerland’s SVME PMI. Canada and the US are on holiday to celebrate Labor Day.

On Tuesday, traders will focus on China’s Non-Manufacturing PMI; Australia’s Current Account, Retail Sales, Interest Rate Announcement, and RBA Rate Statement; Spain’s Unemployment Change; UK Construction PMI; and US ISM Manufacturing PMI.

Australia kicks off Wednesday with the GDP data, followed by UK Halifax HPI; Spain Italy, and UK Services PMI; Eurozone Retail Sales; US and Canada Trade Balance; US Beige Book; BOC Rate Announcement and Statement.

On Thursday, there will be Australia’s Trade Balance; BOJ’s Press Conference and Monetary Policy Statement; BOE’s and ECB’s Rate Announcement and Statement; US Unemployment Claims, ISM Non-Manufacturing, and Factory Orders.

Finally on Friday, the week closes with Germany’s Trade Balance and Industrial Production; Switzerland’s CPI; UK Trade Balance and Manufacturing Production; US Non-Farm Employment Change and Unemployment Rate; Canada’s Ivey PMI, Employment Change and Unemployment Rate.

Federal Reserve Open Market Committee: QE Could Be Tapered Later This Year

According to the latest Federal Reserve Federal Open Market Committee Meeting Minutes, majority of the FOMC participants were “broadly comfortable” with the tapering of the asset purchases “later this year.” The minutes also noted that domestic economic activity has progressed at a moderate pace during the first half of 2013, labor conditions improved, while jobless rate continues at an elevated pace.

US Unemployment Claims grew more than expected in the prior week at 336,000. Meanwhile, the National Association of Realtors said Existing Home Sales advanced 5.39 million in July, its quickest pace since November 2009. On the other hand, the Census Bureau reported New Home Sales plunged to just 394,000 in July and the June reading was revised down to 455,000 from its initial reading of 497,000.

In other news, Flash Manufacturing PMI and Flash Services PMI data were released across Europe. France had them at 49.7 and 47.7, Germany at 51.3 and 51.0, and Eurozone at 52.0 and 52.4, respectively.

UK’s Second Estimate Gross Domestic Product went up 0.7 percent during the second quarter of the year, thanks to advances in manufacturing, construction, and trade. Preliminary Business Investment also increased, 0.9 percent, during the same period.

 Commodities

Gold marched higher for a third straight week and bulls just missed the $1,400 level a few hours before the week ended. It would be interesting to see if there are remaining bears lurking around and above the $1,400 level. We expect layers of resistance ahead of $1,500. Higher targets include $1,550-$1,630.

Tug-of-war rages on in Oil for a seventh straight week. Infighting between bulls and bears focus mainly between $103 and $108 within the broader $102-$109 range. Overall, the risk is slightly to the downside if the weekly declining peaks are a good indication. Expect the consolidation to persist until we get a decent break out of this range.

Currencies

EURUSD managed to complete its third bullish weekly close despite whipsaw moves during several trading sessions. The pair made a fleeting excursion above 1.3400, but overall the level capped throughout the week. We could see bullish attempts to break beyond this level next week.

Thanks to Dollar recovery, USDJPY has emerged successful in this trading week following last week’s achievement in defending the 96.00 level. To keep the momentum going, bulls need to launch a stronger attack to 100-101.50 starting this coming week.

GBPUSD went from a leader to a laggard after the pair failed to hold on to its gains above the 1.5700 level. This move broke the string of weekly advances which started in the low-1.5200s. Despite this, bulls are still ahead but they need to maintain support at 1.5500 if any attacks surface next week.

The Week Ahead

On Monday, there will only be New Zealand’s Trade Balance and US Durable Goods Orders. UK banks will observe the Summer Bank Holiday.

On Tuesday, traders will only have to look at Germany’s Ifo Business Climate and US CB Consumer Confidence.

Economic releases pick up the pace on Wednesday with Australia’s Construction Work Done; Gfk German Consumer Climate; Eurozone M3 Money Supply; UK CBI Realized Sales and BOE’s Carney speech; and US Pending Home Sales.

On Thursday, there will be Japan Retail Sales; New Zealand’s ANZ Business Confidence; Australia’s Private Capital Expenditures; Germany’s Preliminary CPI; Switzerland’s Employment Level; Canada’s Current Account and RMPI; and US Preliminary GDP and Unemployment Claims.

Finally August ends on Friday with Japan’s Household Spending, Preliminary Industrial Production, and Tokyo Core CPI; Australia’s Private Sector Credit; Germany’s Retail Sales; UK Nationwide HPI and Net Lending to Individuals; and US Chicago PMI and Revised UoM Consumer Sentiment.

Canada Jobs Data Disappoints; RBA Cuts Rates As Expected

During its board meeting on August 6, the Reserve Bank of Australia under the leadership of Governor Glenn Stevens determined to slash the Cash Rate to 2.50 percent from 2.75 percent. The Board views commodity prices to be at elevated levels. It foresees a pickup in the global growth by 2014.

On Thursday, Australia’s Bureau of Statistics announced a shocking decline in its Employment Change data. The labor force was reduced by 10,200 in July, a big surprise since analysts expected a gain of 6,200 jobs. Unemployment Rate improved a bit, 5.7 percent.

Canada also revealed surprisingly poor jobs data on Friday. Employment Change lost 39,400 jobs in July as there were lesser employment opportunities in government and for the youth. The Unemployment Rate climbed a notch to 7.2 percent.

Building Permits in Canada fell 10.3 percent, more than the -2.5 percent estimate. This decline in June is the first in the last 6 months. Meanwhile, Ivey PMI in July also fell to 48.4, the first decline below the 50 level since November.

Commodities

Gold started off the week quite tepid as it followed through with the selling momentum from the prior week. This changed mid-week as price made a V-shaped recovery enough to enable price to close the week just a tad above the weekly open and the embattled $1,300 level. There’s a lot of work ahead for the bulls: lots of wood to chop through $1,350. If they succeed, bears could scramble for the exits as $1,400 would become vulnerable by then.

The potential double top mentioned last week materialized quite well, but price opted to bounce soon after the double top’s bottom broke and price reached slightly beyond the $102 level. Unlike in Gold, oil buyers did not have enough time to recover all the losses, but they managed to close the week just above $105. Near-term areas to watch are $106-$108 and $100-$102.

Currencies

EURUSD finally made a march upward this week, but price quickly reversed after touching 1.3400. Overall, this gives bulls control of the pair in four out of the last five weeks, and this gets them closer to their mid-term goal of reaching 1.3700. To achieve this, they need to keep the momentum on their side in the next few weeks.

With the inability to move higher from 99, sellers obviously saw no option but to dump price lower throughout the week. The pair slid 330 pips and fleetingly visited the upper-95.00s. This puts 93.00-94.00 in serious danger in the next few weeks.

GBPUSD had a volatile week, featuring a near-330-pip whipsaw on Wednesday during the time of BOE Governor Carney’s speech and release of the BOE Inflation Report. Thanks to this price action, GBPUSD caught up with EURUSD, and the former is on track to move toward 1.5700.

The Week Ahead

It’s pretty much all about Japan on Monday with the slew of economic releases such as Japan’s Preliminary GDP, CGPI, and Revised Industrial Production. Switzerland’s Retail Sales and US Federal Budget Balance will follow late in the day

On Tuesday, there are Japan’s Core Machinery Orders and BOJ Monetary Policy Meeting Minutes; Australia’s NAB Business Confidence; New Zealand REINZ HPI; UK CPI, RPI and PPI Input; Germany’s ZEW Economic Sentiment; Eurozone Industrial Production and ZEW Economic Sentiment; US Retail Sales, Business Inventories, and Import Prices.

Busy Wednesday starts early with New Zealand Retail Sales; Australia’s Westpac Consumer Sentiment and Wage Price Index; France and Germany GDP; France Non-Farm Payrolls (Prelim); Switzerland’s PPI; UK Claimant Count Change, MPC Asset Purchase Facility Votes, MPC Official Bank Rate Votes, Unemployment Rate, and Average Earnings Index; Eurozone Flash GDP; US PPI.

On Thursday, there are New Zealand’s Business NZ Manufacturing Index; Australia’s MI Inflation Expectations; UK Retail Sales; US CPI, Unemployment Claims, TIC Long-term Purchases, Empire State Manufacturing Index, Philly Fed Manufacturing Index, Industrial Production and NAHB Housing Market Index.

Finally, Friday releases come in the form of Eurozon Current Account, Trade Balance, and CPI; Canada’s Manufacturing Sales; US Housing Starts, Prelim. Unit Labor Costs, Prelim. Nonfarm Productivity, Building Permits, and UoM Consumer Sentiment.

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.

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.