Market analysis
Highlights:
- EUR/USD : Erases most week's gains
- GBP/USD : Rebounds from one-week low
- USD/JPY : Remains lower despite mostly positive U.S. data
- USD/CAD : Trims losses after U.S. data
- Gold : Steady as focus shifts to timing of U.S. rate hikes
- Crude Oil : Oil prices drop as concerns overshadow OPEC cuts
EUR/USD
Erases most week's gains
There was some good volatility in the EURUSD pair over the last week as the first part of the week was dominated by the strength of the dollar but almost the entire move was reversed during the second part of the week. We expect the pair to now consolidate with a bullish bias for the coming week with the top likely to hold around 1.0800 and the bottom likely to hold within the range at 1.0500. We are entering into the second half of the month when the economic news generally dries up in almost all parts of the world and so the moves are then dominated by existing trends and currency flows. The euro weakened broadly amid concerns that the French left could unite behind one candidate in the upcoming elections, possibly knocking centrist and right nominees out of the race in the first round. This possible alliance could increase the chances of anti-European Union Marine Le Pen winning the presidency in the second-round runoff.
Looking ahead to the coming week, we have a holiday in the US on Monday while there is not much news from the Eurozone or the US for the rest of the week as well. So, we can be looking at some more consolidation and ranging in the pair for the upcoming week.
EUR/USD
GBP/USD
Rebounds from one-week low
The pound continued to trade and consolidate within a tight range for the second week running as neither the strength in the dollar during the early part of the week nor the weakness in the dollar in the latter part did much to change the GBPUSD price by very much. With both US and UK undergoing a period of uncertainty with the US under the new Trump administration on one hand and the UK with the Brexit process on the other hand, this pair has been caught in a kind of a stalemate which has pushed the pair to trade within a 400-500 pip range for the past few weeks. Last week, we saw the CPI data and the average earnings data from the UK coming in weak but it was compensated by the claimant count change data which came in very strong. The U.K. Office for National Statistics said retail sales decreased 0.3% in January, compared to expectations for a 0.9% rise. The UK unemployment rate remained steady at an 11-year low of 4.8% in the three months to December, the Office for National Statistics said. The number of people claiming unemployment benefit fell by 42,400 to 787,400 in January compared with a revised fall of 20,500 in December. The ONS also said earnings excluding bonuses rose by 2.6% in the last quarter, down from 2.7% a month ago. Including bonuses, earnings also rose by 2.6%, down from 2.8%. The report came a day after figures showing that the annual rate of inflation rose by 1.8% in January, the most since June 2014 as the Brexit-fueled drop in sterling pushed up import prices. So, as far as the pound was concerned, the economic data has been either good or fairly balanced over the past few weeks and this is one of the major reasons why the pound has not fallen off over the last few weeks despite all the uncertainty and risks surrounding the Brexit process. Looking ahead to the coming week, the economic calendar is pretty clear with just the UK GDP to be released but we are going to see the upper house of the UK Parliament debate the Article 50 and once it is invoked, there is no going back as far as the Brexit process is concerned.
GBP/USD
USD/JPY
Remains lower despite mostly positive U.S. data
The Dollar/Yen posted a two-sided trade last week, first supported by rising U.S. Treasury yields and increased demand for higher risk assets then pressured as investors reduced the odds of a rate hike in March by the Fed and increasing concerns over the upcoming election in France. The USD/JPY closed the week at 112.789, down 0.375 or -0.33%. Rising stocks and Treasury yields and the prospect of a March Fed rate hike helped drive the USD/JPY higher during the early part of the week. By mid-week, the rally was over for the USD/JPY. Yellen may have helped put in the top after she offered no additional insight on the timing of the central bank’s next rate hike. The uneasiness on the political front over Trump’s policies and the upcoming elections in Europe especially in France also drove investors into safe haven assets like U.S. Treasury’s, gold and the Japanese Yen.
USD/JPY
USD/CAD
Trims losses after U.S. data
The Canadian dollar slid lower against its broadly stronger U.S. counterpart on Monday as Canadian Prime Minister Justin Trudeau met with U.S. President Donald Trump in the White House. Ahead of Monday's meeting, the first between the two leaders since Trump took office last month, Trudeau said he expected they would "find a lot of common ground." Trudeau also said he would look to "defend and demonstrate Canadian values," but do so "respectfully and not from an ideological standpoint.” on Tuesday the Canadian dollar rose to one-week highs against its U.S. counterpart , ahead of congressional testimony by Federal Reserve Chair Janet Yellen later in the session. Yellen will present the Fed’s report on monetary policy and the economy to the U.S. Senate on Tuesday and the House on Wednesday, her first testimony since the U.S. central bank hiked rates in December. On Wednesday the U.S. dollar rose against its Canadian counterpart, as strong U.S. data boosted optimism over the economy and added to expectations for a U.S. rate hike in the near future. The Commerce Department said that consumer prices increased by 0.6% last month, compared to forecasts for a 0.3% rise. Year-over-year, consumer prices climbed 2.5% in January. On Thursday the U.S. dollar trimmed losses against its Canadian counterpart , easing off a one-and-a-half week low after the release of strong U.S. economic reports, although higher oil prices lent support to the commodity-related Canadian currency. The U.S. Department of Labor said initial jobless claims increased by 5,000 to 239,000 in the week ending February 11 from the previous week’s total of 234,000. Analysts expected jobless claims to rise by 11,000 to 245,000 last week. On Friday the U.S. dollar edged higher against its Canadian counterpart, as optimism over the strength of the U.S. economy and expectations for a near-term rate hike by the Federal Reserve lent support to the greenback.
USD/CAD
Gold
Steady as focus shifts to timing of U.S. rate hikes
Gold futures traded lower earlier in the week before reversing course to close higher for the third straight week. The market started under pressure because of a strong U.S. Dollar. Gold for February delivery settled down 0.46% at $1,235.85 on the Comex division of the New York Mercantile Exchange. The precious metal still notched up a weekly gain of 0.35% as uncertainty over the policies of U.S. President Donald Trump spurred safe haven demand for bullion. The Greenback was supported at the start of the week by carryover buying related to President Trump’s proclamation that he would deliver his tax reform plan within two to three weeks. Gold was also pressured by rising U.S. Treasury yields and a drive by the stock market into new record territory. Stocks were driven higher by Trump, but Treasury yields were pushed higher by robust U.S. economic news and hawkish commentary from Federal Reserve Chair Janet Yellen. Data on Wednesday showed that U.S. consumer price inflation jumped 0.6% in January, the biggest increase in almost four years. Another report showed that U.S. retail sales also outstripped expectations, increasing 0.4% last month. The upbeat data came a day after Federal Reserve Chair Janet Yellen said in testimony to the U.S. Senate that the bank is on course to raise interest rates at one of its forthcoming meetings.
In the holiday shortened week ahead, the Fed is to publish the minutes of its February meeting on Wednesday, which will be scrutinized for clues on the timing of the next rate hike. Investors will be looking to U.S. housing data in order to see whether the rise in consumer spending and inflation is translating into higher house prices and a pick-up in home sales.
GOLD
Crude Oil
Oil prices drop as concerns overshadow OPEC cuts
Oil fell more than 1 percent on Monday after an OPEC report showing high compliance with last year's landmark production- cut deal underwhelmed investors while signs of rising U.S. crude output continued to weigh on prices. On Tuesday Crude oil inventories jumped 9.94 million barrels the end of last week, more than expected, according to estimates from the American Petroleum Institute (API) on Tuesday. Gasoline stocks rose 720,000 barrels and distillate stocks increased by 1.5 million barrels. On Wednesday Oil prices fell slightly to settle lower in the U.S., despite a surge in inventories as the market continues to welcome an effort to trim global supplies by OPEC and non-OPEC nations. On Thursday Oil traders for the last two weeks have shrugged off reports that U.S. stockpiles are brimming at their largest levels ever recorded, as the market continues to bet that crude prices will climb higher.
Oil has maintained its buoyancy because the market is betting that cuts by the Organization of the Petroleum Exporting Countries (OPEC) will largely rebalance the oil market, despite continued production increases from shale formations in the United States. Crude prices have come under pressure in recent sessions, as the latest drilling reports from the U.S. Energy Information Administration (EIA), compounded fears that increase drilling activity from U.S. crude will underpinned OPEC and other producers’ efforts to combat the demand and supply imbalance in the industry. On Friday Oil futures added a few pennies, but posted their first weekly decline in five weeks as concerns over rising production and swelling stockpiles in the U.S. offset efforts by major producers to cut enough output to reduce a global glut. Data from oilfield services provider Baker Hughes on Friday revealed that the number of active U.S. rigs drilling for oil rose by six last week, the fifth weekly increase in a row. That brought the total count to 597, the most since November 2015.
CL
MAJOR DATA RELEASED DURING LAST WEEK
| Event | Actual | Previous | |
| JPY | Prelim GDP q/q | 0.002 | 0.003 |
| EUR | EU Economic Forecasts | ||
| CNY | CPI y/y | 0.025 | 0.021 |
| CNY | PPI y/y | 0.069 | 0.055 |
| EUR | German Prelim GDP q/q | 0.004 | 0.002 |
| CHF | PPI m/m | 0.004 | 0.002 |
| GBP | CPI y/y | 0.018 | 0.016 |
| GBP | PPI Input m/m | 0.017 | 0.027 |
| GBP | RPI y/y | 0.026 | 0.025 |
| EUR | Flash GDP q/q | 0.004 | 0.005 |
| EUR | German ZEW Economic Sentiment | 10.4 | 16.6 |
| USD | PPI m/m | 0.006 | 0.003 |
| USD | Core PPI m/m | 0.004 | 0.002 |
| USD | Fed Chair Yellen Testifies | ||
| USD | FOMC Member Kaplan Speaks | ||
| GBP | Average Earnings Index 3m/y | 0.026 | 0.028 |
| GBP | Claimant Count Change | -42.4K | -20.5K |
| GBP | Unemployment Rate | 0.048 | 0.048 |
| CAD | Manufacturing Sales m/m | 0.023 | 0.023 |
| USD | CPI m/m | 0.006 | 0.003 |
| USD | Core CPI m/m | 0.003 | 0.002 |
| USD | Core Retail Sales m/m | 0.008 | 0.004 |
| USD | Retail Sales m/m | 0.004 | 0.01 |
| USD | Empire State Manufacturing Index | 18.7 | 6.5 |
| USD | Capacity Utilization Rate | 0.753 | 0.756 |
| USD | Industrial Production m/m | -0.003 | 0.006 |
| USD | Fed Chair Yellen Testifies | ||
| USD | Mortgage Delinquencies | 0.048 | 0.0452 |
| USD | Crude Oil Inventories | 9.5M | 13.8M |
| USD | FOMC Member Harker Speaks | ||
| USD | FOMC Member Dudley Speaks | ||
| JPY | BOJ Gov Kuroda Speaks | ||
| AUD | Employment Change | 13.5K | 16.3K |
| AUD | Unemployment Rate | 0.057 | 0.058 |
| EUR | ECB Monetary Policy Meeting Accounts | ||
| USD | Building Permits | 1.29M | 1.23M |
| USD | Philly Fed Manufacturing Index | 43.3 | 23.6 |
| USD | Unemployment Claims | 239K | 234K |
| USD | Housing Starts | 1.25M | 1.28M |
| USD | President Trump Speaks | ||
| NZD | Retail Sales q/q | 0.008 | 0.008 |
| NZD | Core Retail Sales q/q | 0.006 | 0.002 |
| GBP | Retail Sales m/m | -0.003 | -0.021 |
| CAD | Foreign Securities Purchases | 10.23B | 7.26B |
MAJOR DATA COMING OUT THIS WEEK (Time zone GMT)
| Date | Time | Event | Forecast | Previous | |
| 2/19/2017 | 9:45pm | NZD | PPI Input q/q | 0.009 | 0.015 |
| 2/20/2017 | All Day | EUR | ECOFIN Meetings | ||
| 2/20/2017 | All Day | USD | Bank Holiday | ||
| 2/20/2017 | 1:30pm | CAD | Wholesale Sales m/m | 0.004 | 0.002 |
| 2/21/2017 | 12:30am | AUD | Monetary Policy Meeting Minutes | ||
| 2/21/2017 | 8:00am | EUR | French Flash Manufacturing PMI | 53.5 | 53.6 |
| 2/21/2017 | 8:00am | EUR | French Flash Services PMI | 53.8 | 54.1 |
| 2/21/2017 | 8:30am | EUR | German Flash Manufacturing PMI | 56.2 | 56.4 |
| 2/21/2017 | 8:30am | EUR | German Flash Services PMI | 53.6 | 53.4 |
| 2/21/2017 | 9:00am | EUR | Flash Manufacturing PMI | 55 | 55.2 |
| 2/21/2017 | 9:00am | EUR | Flash Services PMI | 53.7 | 53.7 |
| 2/21/2017 | 9:30am | GBP | Public Sector Net Borrowing | -14.4B | 6.4B |
| 2/21/2017 | 1:50pm | USD | FOMC Member Kashkari Speaks | ||
| 2/21/2017 | Tentative | NZD | GDT Price Index | 0.013 | |
| 2/21/2017 | 5:00pm | USD | FOMC Member Harker Speaks | ||
| 2/21/2017 | 9:30pm | AUD | RBA Gov Lowe Speaks | ||
| 2/22/2017 | 12:30am | AUD | Construction Work Done q/q | 0.005 | -0.049 |
| 2/22/2017 | 12:30am | AUD | Wage Price Index q/q | 0.005 | 0.004 |
| 2/22/2017 | 9:00am | EUR | German Ifo Business Climate | 109.6 | 109.8 |
| 2/22/2017 | 9:30am | GBP | Second Estimate GDP q/q | 0.006 | 0.006 |
| 2/22/2017 | 9:30am | GBP | Prelim Business Investment q/q | 0 | 0.004 |
| 2/22/2017 | 10:30am | EUR | Long Term Refinancing Operation | 62.2B | |
| 2/22/2017 | 11:00am | GBP | MPC Member Cunliffe Speaks | ||
| 2/22/2017 | 1:30pm | CAD | Core Retail Sales m/m | 0.008 | 0.001 |
| 2/22/2017 | 1:30pm | CAD | Retail Sales m/m | 0.001 | 0.002 |
| 2/22/2017 | 3:00pm | USD | Existing Home Sales | 5.55M | 5.49M |
| 2/22/2017 | 6:00pm | USD | FOMC Member Powell Speaks | ||
| 2/22/2017 | 7:00pm | USD | FOMC Meeting Minutes | ||
| 2/22/2017 | 8:00pm | GBP | MPC Member Shafik Speaks | ||
| 2/23/2017 | 12:30am | AUD | Private Capital Expenditure q/q | -0.004 | -0.04 |
| 2/23/2017 | 1:30pm | USD | Unemployment Claims | 242K | 239K |
| 2/23/2017 | 4:00pm | USD | Crude Oil Inventories | 9.5M | |
| 2/23/2017 | 10:30pm | AUD | RBA Gov Lowe Speaks | ||
| 2/24/2017 | 1:30pm | CAD | CPI m/m | 0.003 | -0.002 |
| 2/24/2017 | 1:30pm | CAD | Trimmed Core CPI y/y | 0.016 | |
| 2/24/2017 | 3:00pm | USD | New Home Sales | 575K | 536K |
| 2/24/2017 | 3:00pm | USD | Revised UoM Consumer Sentiment | 96.1 | 95.7 |
Disclaimer
√ Moving Average Convergence/Divergence (MACD) : MACD uses different exponential moving averages to generate buy and sell indicators. The lower pane of the chart shows two lines: a Differential Line and a Signal Line. The Differential Line is the difference between a short and long-period exponential moving average, typically 12 and 26 periods. The Signal Line is typically a 9-period exponential moving average. When the DL crosses the SL from above, a sell indicator is generated, and when it crosses from below a buy signal is generated.
√ Relative Strength Index (RSI): This is a momentum indicator that measures a security\'s price in relation to itself. The lower pane of the chart shows a line that fluctuates on a scale of 0 to 100. Typically buy signals are generated at 30 and sell signals are generated at 70. If the line breaks 30, the security is oversold, and a reversal is imminent. If the line breaks 70, it is overbought and is due for a downward correction.
This report is provided by our experts in the research group for information purposes only and is deemed reliable but provides no guarantee as to its accuracy or completeness. Trust Capital S.A.L. will not be accountable for any decision based on the contents of this report. This document is not and should not be construed as an offer to sell or solicitation of an offer to purchase or subscribe for any investment or service. Trust Capital S.A.L. has based this document on information obtained from sources it believes to be reliable but which it has not been independently verified. Trust Capital S.A.L. makes no guarantees, representations or warranties and accept no responsibility or liability as to its accuracy or completeness. Expressions of opinion herein are subject to change without notice.
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