Geneva, CH -- (SBWIRE) -- 02/20/2014 -- Janet Yellen made her first public appearance as Fed’s chair last week and testified to Congress. But her pledge to continue with tapering provided no support to the greenback as it tumbled across the board. Separately the Commerce Department reported earlier that US retail sales fell 0.4% in January, lower than expectations for a 0.3% increase. Core retail sales came in flat in January compared to expectations for a 0.1% rise. Elsewhere, the Department of Labor reported that the number of individuals who filed for unemployment assistance in the U.S. last week rose by 8,000 to 339K from the previous week’s total of 331K. Analysts had expected jobless claims to fall by 1,000. The pitiable data remind investors that the US economic recovery is still not up to mark and that the Fed will take its time to cut its USD65 billion bond-buying program, while hiking interest is not on the horizon.
Sterling Jumped On Forward Guidance Phase Two
Pound jumped sharply and was the strongest currency last week as BoE inflation report hinted at rate hike in 2015. BoE upgraded its forward guidance on rates and revised up its forecast for 2014 economic growth to 3.4% from a 2.8% forecast issued in November. Speaking after the bank published its latest quarterly inflation report, BoE Governor Mark Carney said in the six months since forward guidance was implemented the UK unemployment rate has fallen to 7.1% from 7.8%. BoE governor Carney noted that the first phase of forward guidance is working and “uncertainty about interest rates has fallen”. And, as a result of “exceptionally strong job growths”, unemployment is likely to reach the 7% threshold by “the spring”. And when that happens, the Central Bank will re-assess “a wide array of indicators” for monetary policies and start forward guidance phase two.
Yen Rose Despite Disappointing GDP Data
The Yen rose against most major currencies last week and on Monday despite disappointing GDP and industrial production growth data in Japan and falling motor vehicles sales in Australia. Japan’s cabinet office reported on Monday that country’s GDP grew by only 0.3% in the quarter ending in December, same as in the previous quarter but against the expected rise of 0.7%. The YoY GDP in Japan also rose only 1% against the expectation of 2.8% and previous rise of 1.1%. The YoY GDP price index fell 0.1% against a forecast of a 0.2% fall. In the previous year it fell 0.3%. According to Japan’s Ministry of Economy, Trade and Industry country’s industrial output for December rose 0.9% against the expected rise 1.1%, as it was in November. Last week Ministry of Finance said that Japan’s Current Account fell more than expected to -0.20T, from -0.05T in the preceding month. Analysts had expected Japan’s Current Account to fall -0.06T last month.
Euro Rose On Q4 GDP Data
The Euro rose against most major currencies last week as stronger-than-forecast Euro zone fourth quarter growth data bolstered the outlook for the recovery in the Euro zone. The Euro was boosted after data showed that the Euro zone economy expanded 0.3% in the three months to December and expanded 0.5% from the same period a year earlier. Market expectations had been for quarterly growth of 0.2% and a year-over-year increase of 0.5%. Separately Germany’s GDP rose 0.4% in the fourth quarter, ahead of expectations for 0.3% growth, while France avoided falling back into a recession, posting growth of 0.3% in the final three months of 2013. The data eased concerns that the ECB could tighten monetary policy at its next meeting, after President Mario Draghi said last week the bank would wait for more information before taking any action.
Aussie Advanced On Robust Chinese Trade Data
The Australian Dollar advanced against other major currencies last week to re-approach a one-month high hit earlier in the week. The Aussie jumped to a one-month high against the greenback last Wednesday after robust Chinese trade data dispelled fears over a slowdown in the world’s second largest economy. Chinese exports rose 10.6% in January from a year earlier, outstripping expectations for 2% gain, while imports jumped 10% and the trade surplus widened. The Asian nation is Australia’s biggest export partner.
Loonie Retreated From One-Month High
The Canadian Dollar backed down from one-month highs against the US Dollar on Friday as unexpectedly weak domestic manufacturing sales data revived concerns over the subdued economic outlook. The Canadian Dollar gave up gains after official data showed that manufacturing sales fell 0.9% in December, against expectations for a 0.3% increase. The data supported the BoC’s dovish stance on the outlook for inflation and economic growth. The pair had been moving lower this month, retracing some of January’s strong rally, which carried the USDCAD pair to four-and-a-half year highs.
Market data for this week
Ahead of the coming week, below is a list of significant events likely to affect the markets.
Monday: BoJ Interest Rate Decisions
Tuesday: UK CPI; Euro ZEW Survey
Wednesday: BoE Minutes; US FOMC Minutes
Thursday: US CPI; BoJ Minutes
Friday: Canada CPI
Technical markets outlook for this week
EURUSD Weekly Outlook
Weekly bias in EURUSD remains mildly on the upside for 1.3740 resistance. Break will confirm that whole pull back from 1.3892 has completed at 1.3482. In such case, the larger rally would be resuming for another high above 1.3892. On the downside, below 1.3560 minor support will turn bias back to the downside for 1.3480 low.
GBPUSD Weekly Outlook
GBPUSD rally continues as the week starts and reaches as high as 1.6822 so far. Weekly bias remains on the upside and the whole up trend from 1.4810 is still in progress towards 1.6920 key resistance next. On the downside, below 1.6670 minor support will turn bias neutral and bring consolidations first before staging another rally.
USDCHF Weekly Outlook
USDCHF edged lower earlier this week and is still pressing 0.8900 support for the moment. Weekly bias remains on the downside. Decisive break of 0.8900 will extend the fall from 0.9156 to retest 0.8800 low. On the upside, above 0.9037 will bring another recovery to 0.9156 resistance. But again, even in that case, we’d be cautious on reversal at 0.9080 will bring another fall and extend sideway trading.
USDJPY Weekly Outlook
USDJPY edged higher to 102.70 last week but faced strong resistance from 55 days EMA. The development suggests that recovery from 101.25 has completed. Initial bias is mildly on the downside this week and break of 101.40 will target 100.61 key support level. Decisive break there will confirm medium term topping at 105.41 and the bearish trend will bring USDJPY towards 96.56 support. On the upside, above 102.70 will turn focus to 105.40.
USDCAD Weekly Outlook
Weekly bias in USDCAD remains mildly on the downside for the moment. The correction from 1.1200 is still in progress for 38.2% retracement of 1.0180 to 1.1200 at 1.0811 to correct the whole rally from 1.0180. On the upside, break of 1.1090 minor resistance is needed to indicate completion of the pull back. Otherwise, outlook will stay mildly bearish.
AUDUSD Weekly Outlook
AUDUSD edges higher early this week and the breach of 0.9066 suggest that rebound from 0.8659 is resuming. Focus remains on 0.9170 resistance. Decisive break there will be an early sign of larger trend reversal. That is the whole correction pattern from 0.9760 might have finished at 0.8660 and further rally should be seen to 50% retracement of 0.9770 to 0.8660 at 0.9211next. On the downside, below 0.8980 will dampen the bullish case and turn bias back to the downside.
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