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Released 30 July 2012 - AUD Weekly Market Watch 30/07/12

Last week recap



EUR/USD reversed direction last week trading sharply higher after ECB President Mario Draghi verbally intervened pledging the ECB would do anything to defend the Euro. The comments came as Spanish 10-year bond yields soared to a record 7.75% pushing the EUR/USD rate to new recent lows. The week began with the rate consolidating at a slightly lower level after Spanish yields crossed the 7.5% level with some of Spain’s provinces requesting aid and increased concerns over the exit of Greece from the Eurozone. The pair then made its weekly low of 1.2041 on Tuesday — a level not seen since June 1st of 2010, when it hit 1.1876 — as Spanish bond yields neared 7.7% and German Flash Manufacturing PMI came out at 43.3, versus an expected 45.6 print. Both German and EZ Flash Services and Manufacturing PMIs came out lower than expected. Adding to the pressure on the Euro was Moody’s downgrade of the Aaa outlooks for Germany, Luxembourg and the Netherlands to negative due to rising uncertainties in the Eurozone. On Wednesday the rate reversed direction and traded higher as ECB council member Ewald Nowotny argued in favour of giving the ESM bailout facility a banking license. Economic data for Wednesday had German Ifo Business Climate decline to 103.3 from 105.2, versus an expected print of 104.8, while U.S. New Home Sales dropped to 350K from 382K with an expected reading of 372K. The rate continued higher on Thursday after ECB president Draghi stated that the “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough,” he continued, “To the extent that the size of the sovereign premia (borrowing costs) hamper the functioning of the monetary policy transmission channels, they come within our mandate.” Numbers on Thursday had U.S. Core Durable Goods orders decline -1.1% m/m, versus an expected increase of +0.1%, while Durable Goods Orders rose +1.6% m/m, versus +0.4% expected. Also, U.S. Pending Home Sales declined -1.4% m/m, versus an expected rise of +0.6%. The pair extended its rally on Friday, making its weekly high of 1.2389 after Germany’s Finance Minister Wolfgang Schaeuble pledged to “take the necessary measures to secure the euro in the framework of the existing ECB mandate.” Friday’s economic numbers included U.S. Advance GDP increase +1.5% q/q as widely anticipated. EUR/USD went on to close at 1.2321, showing an overall increase of +1.2% from its previous weekly close.



USD/JPY closed unchanged after trading in a limited range for most of last week. The week began with the rate trading off of its weekly low of 77.94 on Monday in the absence of any significant economic data out of either country. The rate weakened on Tuesday as U.S. Flash Manufacturing PMI came in as expected. Wednesday saw the pair consolidate after the Japanese Trade Balance showed its deficit had contracted to -0.30T, versus -0.39T expected. The rate then picked up steam on Thursday as the United States reported mixed Durable Goods numbers. On Friday, the pair then made its weekly high of 78.67 after Tokyo Core CPI declined -0.6% y/y as widely anticipated and Japanese Retail Sales, which increased by only +0.2% y/y, versus an expected rise of +1.2%. USD/JPY then sold off somewhat on position squaring to close at 78.43, showing a loss of a mere pip and virtually unchanged for the week.


GBP/USD extended its previous weeks’ gains as Sterling rose in sympathy to the Euro. The week began with Cable falling along with other risk assets as the Euro sold off sharply. The rate consolidated at a lower level on Tuesday as UK BBA Mortgage Approvals came out at 26.3K, significantly lower than the 31.4K that was expected. On Wednesday, the rate made its weekly low of 1.5457 after UK Preliminary GDP declined -0.7% q/q, considerably worse than the contraction of -0.2% that was expected. The quarterly decline was the steepest since Q1 of 2009. Also out was UK CBI Industrial Order Expectations, showing a reading of -6, versus an expected -11 print. The pair then reversed and rallied on Thursday as the United States reported mixed Durable Goods Orders numbers and the ECB’s Draghi made comments supporting the Euro. Cable then made its weekly high of 1.5767 on Friday as risk assets continued benefiting from Germany’s pledge to support the Euro. GBP/USD went on to close at 1.5745, showing a gain of +0.8% for the week.



AUD/USD continued rallying last week as risk assets gained ground against the Greenback and Australia reported slightly lower inflation numbers. The week began on a soft note with the rate dropping along with other risk assets due in part to the Euro, and despite Australian PPI increasing +0.5% q/q, versus an expected rise of +0.3%. The pair continued selling off on Tuesday after RBA Governor Stevens stated that, “A serious deterioration in international economic conditions would still see Australia with scope to use macroeconomic policy, if needed, as long as inflation did not become a concern, which would be unlikely in the scenario in question.” The rate then made its weekly low of 1.0336 on Wednesday before trading higher after the Australian CB Leading Index came out with an increase of +0.4% m/m, versus a previous decline of –1.3%. Also out was Australian CPI and Trimmed Mean CPI, both increasing +0.5% q/q, versus +0.6% expected. The pair continued higher on Thursday as the United States reported mixed Durable Goods Orders and lower Pending Home Sales. On Friday, the rate made its weekly high of 1.0486 as risk assets continued gaining against the Greenback, bringing the pair to close at 1.0480, with an overall gain of +1.0% for the week.



USD/CAD lost ground last week as the Loonie, along with other risk assets were favoured over the Greenback. The week began on a positive note as the U.S. Dollar strengthened against the majors and other risk assets due in part to the European situation. On Tuesday, the rate continued higher as Canadian Retail Sales increased by +0.3% m/m, versus an increase of +0.4% expected, and Core Retail Sales, which rose +0.5% m/m, versus an increase of only +0.1% that was expected. The pair then made its weekly high of 1.0231 on Wednesday before selling off sharply after a disappointing U.S. New Home Sales number. The pair continued sharply lower on Thursday as risk assets gained after comments by the ECB’s Draghi. The rate then made its weekly low of 1.0029 on Friday bringing the rate to close at 1.0030, showing an overall loss of -1.0% from its previous weekly close.



NZD/USD extended its previous week’s gains as risk appetite improved and the RBNZ left rates unchanged. The week began with the rate trading sharply lower as the Kiwi got hit along with the other commodity currencies. The pair continued heading south on Tuesday despite New Zealand’s Trade Balance showing a surplus of +331M, significantly higher than the expected surplus of +77M. The pair then made its weekly low of 0.7805 on Wednesday before reversing and rallying sharply after the RBNZ left its benchmark Official Cash Rate at 2.5% as widely expected. In his prepared statement after the rate release, RBNZ Governor Bollard stated that, “Domestically, the Bank continues to expect economic activity to grow modestly over the next few years. Housing market activity continues to increase as forecast, and repairs and reconstruction in Canterbury are expected to further boost the construction sector. Offsetting this, fiscal consolidation and the exchange rate are constraining demand growth.” The pair continued higher on Thursday as the United States reported mixed economic data and the ECB’s Draghi statements supported risk assets. On Friday, the pair made its weekly high of 0.8103 as the United States reported Advance GDP bringing the rate to close at 0.8095, showing an overall gain of +1.2% from its previous weekly close.

The week ahead

AUD AUD: The upcoming Australian economic calendar is busier than last week, featuring Retail Sales data on Thursday. Monday starts the week’s highlights off with HIA New Home Sales (last 0.7%), and Tuesday’s key events include Building Approvals (-15.0%) and Private Sector Credit (0.4%). Wednesday then features the HPI (-0.5%), while Thursday offers Retail Sales (0.6%) and the Trade Balance (-0.38B). Friday’s important data then concludes the week with the AIG Services Index (48.8). Resistance for AUD/USD is seen at 1.4086, 1. 0556 and 1.0612, with support noted at 1.0443, 1.0322 and 1.0175/1.0223.

CAD CAD: The upcoming Canadian economic calendar is as quiet as last week, only featuring GDP (0.2%) and the RMPI (1.7%) on Tuesday. The rest of the week offers little noteworthy data. Resistance for USD/CAD is seen at 1.0200/49, 1.0299/1.0361 and 1.0439/45, while support shows at 1.0027/29 and 0.9799.

EUR EUR: The upcoming Eurozone economic calendar is about as active as last week, featuring the ECB’s Rate Decision on Thursday. Monday starts the week’s highlights off with Spanish Flash GDP (-0.4%) and the tentatively scheduled Italian 10-year Bond Auction (last average yield 5.82, with a 1.7 bid to cover ratio), and Tuesday’s key events include German Retail Sales (0.6%), French Consumer Spending (0.2%), German Unemployment Change (8K), the EZ CPI Flash Estimate (2.4%) and the EZ Unemployment Rate (11.2%). Wednesday then features the Spanish Manufacturing PMI (41.1) and the Italian Manufacturing PMI (44.3), while Thursday offers the Spanish Unemployment Change (-98.9K), the ECB’s Minimum Bid Rate Decision (0.75%) and the ECB Press Conference. Friday’s important data then concludes the week with Retail Sales (0.1%). Resistance for EUR/USD is seen at 1.2333/89, 1.2407/42 and 1.2747, with support showing at 1.2259, 1.2143/62 and 1.2041.

GBP GBP: The upcoming UK economic calendar is busier than last week, featuring the BOE’s Rate Decision on Thursday. Monday starts the week’s highlights off with Net Lending to Individuals (0.8B) and CBI Realized Sales (18), and Tuesday’s key events include the GfK Consumer Confidence survey (-28). Wednesday then features the Nationwide HPI (-0.1%), the Manufacturing PMI (48.7) and the Halifax HPI (1.0%) is due out from the 1st to the 8th of July. Thursday offers the Construction PMI (48.3), the Asset Purchase Facility (375B), the BOE’s Official Bank Rate Decision (0.50%) and the tentatively scheduled MPC Rate Statement. Friday’s important data then concludes the week with the Services PMI (51.7). Resistance to the topside for GBP/USD shows at 1.5767/77 and 1.5804/47, while support for the pair is expected at 1.5629/50, 1.5403/84 and 1.5392.

JPY JPY: The upcoming Japanese economic calendar is a bit quieter than last week, featuring Household Spending data on Tuesday. Monday starts the week’s highlights off with Preliminary Industrial Production (1.6%), while Tuesday’s key events include Household Spending (3.1%) and Average Cash Earnings (0.1%). The rest of the week offers little data of note. Resistance for USD/JPY currently shows up at 78.59/99 and 79.04/80, with support indicated at 78.37, 77.66/94 and 76.02.

NZD NZD: The upcoming New Zealand economic calendar is a bit quieter than last week, featuring the NBNZ Business Confidence survey (last 12.6) on Tuesday. Monday offers the only other important economic data release for the week, which is Building Consents (last -7.1%). The chart for NZD/USD shows resistance at 0.8103 and 0.8235/0.8317. On the downside, technical support is expected at 0.8013/86, 0.7919 and 0.7805/58.

USD USD: The upcoming U.S. economic calendar is busier than last week, featuring key employment data on Wednesday and Friday. Monday is quiet, so Tuesday starts the week’s highlights off with the Core PCE Price Index (0.2%), the Employment Cost Index (0.6%), Personal Spending (0.1%), the S&P/CS Composite-20 HPI (-1.5%), the Chicago PMI (52.6), the CB Consumer Confidence survey (61.5), and a speech by Treasury Secretary Geithner. Wednesday then features the ADP Non-Farm Employment Change (122K), the ISM Manufacturing PMI (50.4), Crude Oil Inventories (last 2.7M), the FOMC Rate Statement and the Federal Funds Rate Decision (<0.25%). Thursday offers Weekly Initial Jobless Claims (375K) and Factory Orders (0.4%), while Friday’s important data then concludes the week with Non-Farm Payrolls (101K), the Unemployment Rate (8.2%), Average Hourly Earnings (0.2%) and the ISM Non-Manufacturing PMI (52.2).


Open the calendar

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