General

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.

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.

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.

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.

Japan is now in the spotlight as the voters walk to the polls for another election, providing Japan its seventh leader in just a span of six years. The ruling party is expected to be overrun by the Liberal Democratic Party, which faced a landslide loss in the 2009 elections. LDP leader Shinzo Abe is also expected to win the post he left years ago for health reasons.

US fiscal cliff talks continue between the US leaders. According to people familiar with the ongoing discussions, House Speaker Boehner has recently offered President Obama a tax rate hike for households earning more than one million dollar each year, in exchange for decreasing the cost for federal entitlements. The US leaders continue to with the discussion to avoid the activation in the coming month of more than $600 billion automatic tax hikes and spending cuts.

Stocks and Commodities

S&P 500 ended its six days of straight gains on Thursday as concerns for the US fiscal cliff resurfaced. S&P 500 fell more than 5 points further on Friday and it ended the week 1.80 percent lower at 1,413.58. Apple’s fall of nearly four percent hurt Nasdaq as well, with Nasdaq falling 0.70 percent and Dow declining almost 36 points or 0.27 percent.

Gold started the week in a slightly better shape, spending the first three days above the $1,700 level. It failed to climb to and above the $1,730/50 resistance and this led to another drop below this key level. The week ended at $1,695 and this paves the way for another test of $1,680s, and perhaps the November lows.

Oil has capped its fifth straight weekly gain as investors cheered the favorable manufacturing news out of China and the US. Oil closed 0.98 percent higher on Friday, and continues to be soaked in the middle of the 84.12/90.30 range.

Currencies

EURUSD made a stellar comeback this week, erasing all of its losses in the prior week from the 1.2875 lows. The pair posted five straight gains, following the three-day fall last week. The pair pierced through the September highs on Friday and ended the week strongly – just 10 pips off the highs. Based on current developments, EURUSD is now on track to eliminate most or even all of the losses incurred this year, with next target being 1.3250 and as high as 2012’s high printed in February at 1.3485. Further upmove in the next two weeks could see a follow through in the first quarter of 2013.

USDJPY has had hefty gains since September, and so far there are no indications that bulls will take on a holiday in the coming weeks. From the 75.65 lows printed in 2011, the pair has come a long way and is now poised to breach the 2012 and 2011 highs, which come in at 84.17 and 85.52 respectively. The Japan elections and changes in BOJ policy in the near future would dictate the price action in the coming weeks and months.

GBPUSD finished the week with a 0.89 percent gain and 168-pip range, thanks to Dollar weakness and favorable UK economic numbers, particularly better-than-expected Claimant Count Change and Unemployment Rate. Buyers were successful in defending the key 1.6000 level, and this gave them the momentum to push through bears through 1.6100. The pair ended the week near the highs set in October, and the pair has to contend next with the twin peaks set in April and September at 1.6300, before proceeding to fresh territories.

After hesitating for two weeks, USDCHF has finally pulverized the 0.9213 low set in October. Bulls were unable to touch 0.9400, and this gave sellers the chance to drive prices down by 200 pips. The pair finished the week at 0.9174, well off the October 0.9213 lows, and is now set for a move towards the 0.9000 level.

The Week Ahead

In terms of economic data releases, the coming weeks will be back to normalcy, as the yearend approaches and after several weeks filled with high-level meetings and key reports.

Monday starts off relatively quiet except for the release of US Empire State Manufacturing Index, US TIC Long Term Purchases data, and speeches by ECB President Draghi and FOMC members Stein and Lacker.

On Tuesday, the releases will come in the form of New Zealand’s ANZ Business Confidence, Australia’s Monetary Policy Meeting Minutes, UK BOE’s Quarterly Bulletin, UK CPI, BOE Inflation Letter, and US Current Account data.

For Wednesday, there are releases, particularly New Zealand’s Current Account, Japan Trade Balance, Germany’s Ifo Business Climate, BOE MPC Meeting Minutes, and US Building Permits data.

Thursday is the busiest week with New Zealand GDP, Japan’s Monetary Policy Statement, BOJ Overnight Call Rate, BOJ press conference (the first since Sunday’s elections), Retail Sales data from UK and Canada, and US Unemployment Claims, Existing Home Sales, and Philly Fed Manufacturing Index.

For Friday, there are releases like BOJ Monthly Report, UK Current Account and Public Sector Net Borrowing, Canada’s CPI and GDP, and US Personal Income, Personal Spending, Durable Goods Orders, and revised University of Michigan Consumer Sentiment.