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Rate decision in New Zealand and in Switzerland, US Retail sales, Unemployment claims, Producer prices and Consumer sentiment are the major events for this week. Here is an outlook on the highlights coming our way.
Last week, Non-Farm Payrolls posted a superb job gain of 321,000 in November. The release also showed a 0.4% rise in wages. The unemployment rate remained unchanged at 5.8%. This was the biggest jobs gain since 2012, far above average of 224,000 a month over the past year. Economists expected an expansion of 231,000 positions. This excellent release demonstrating the ongoing improvement in the job market cannot go unnoticed. The Fed will have to reexamine its zero rates policy in the coming weeks.
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Something Interesting in Financial Video December 2014
newdigital, 2014.12.06 08:31
Trading Video: EURUSD, GBPUSD and USDJPY Look to Open Next Week with a Bang (based on dailyfx article)
The FX market has positioned itself for an exciting open next week. Driven by a better-than-expected NFP payroll report, the Dollar Index extended its run to a more than five year high. On market-wide basis, the currency looks unencumbered technically to keep status quo momentum. However, among the crosses, we see a range of important technical levels that could take the wind out of the currency's sails. Some are scalable like GBPUSD and others are critical like EURUSD. Will we be ushered into the next phase of larger currency move or will the year-end seasonal drain throw the breaks on this remarkable financial market performance? We look at the trading landscape for the week ahead in this Trading Video.
USDJPY Fundamentals (based on dailyfx article)
Fundamental Forecast for Japanese Yen: NeutralDomestic developments remain largely an afterthought for the Japanese Yen even as the December 14 snap election looms ahead. Polls ahead of the vote suggest Shinzo Abe and his LDP/Komeito coalition will probably retain its two-thirds majority, giving the Prime Minister the mandate he is after. As we discussed two weeks ago, the inherently expansionary nature of “Abenomics” means the markets are unlikely to be perturbed unless the current government looks to be genuinely threatened. As long as the status quo looks firmly set, the whole ordeal will probably pass relatively quietly. This puts the focus to external factors. The Yen plunged to a seven-year low against the US Dollar following November’s impressively strong Nonfarm Payrolls print, but the response from risk appetite was suspiciously lackluster.
Indeed, the S&P 500 stock index – a benchmark for sentiment trends – was barely changed in Friday’s session. This may be foreshadowing the emergence of year-end capital flows as a formative driver of price action.
Risk-taking has been well-supported in the past year but markets would be wise to question the likelihood of more of the same in 2015. While the precise timing of the first post-QE Fed interest rate hike is a matter of some debate, the general likelihood of stimulus withdrawal in the year ahead is increasingly seen as a given. That may drive liquidation of risk-geared exposure ahead of the calendar year turn as market participants move to lock in performance numbers ahead of a more difficult 12-month stretch ahead.
For currency markets, such a scenario may take the form of an exodus from carry trades, which a usually funded in terms of the perennially low-yielding Japanese unit. That would imply a wave of short-covering on anti-Yen exposure, pushing prices higher. The extent to which US economic news-flow can alter this dynamic remains unclear. November’s Retail Sales and PPI reports as well as December’s UofM Consumer Confidence gauge are on tap. If these prove strong – fueling Fed tightening bets – another Yen selloff mirroring the markets’ post-NFP reaction may be triggered. Outcomes broadly close to forecasts that do not dramatically disrupt the established policy outlook may yield the spotlight to seasonal forces however.
GBPUSD Fundamentals (based on dailyfx article)
Fundamental Forecast for Pound: BearishGBP/USD slipped to a fresh monthly low of 1.5568 as U.S. Non-Farm Payrolls marked the largest advance since January 2012, and the pair may continue to track lower in the week ahead should the fundamental developments coming out of the world’s largest economy ramp up bets of seeing the Federal Reserve normalize monetary policy sooner rather than later.
In contrast, it seems as though the Bank of England (BoE) Minutes, due out on December 17, will show another 7-2 split within the Monetary Policy Committee (MPC) as the central bank refrained from releasing a policy statement following the December 4 meeting, and the British Pound may continue to underperform against its U.S. counterparts over the near to medium-term as the majority remains in no rush to normalize monetary policy. Nevertheless, the underlying strength in the sterling is likely to be better seen in crosses rates such as GBP/AUD especially as BoE Governor Mark Carney continues to prepare U.K. households and businesses for higher borrowing costs.
Beyond the U.K. data prints, MPC members Martin Weale and Ian McCafferty, the two dissenters on the MPC, are schedule to speak in the week ahead, and the fresh batch of BoE rhetoric may heighten the appeal of the British Pound as the central bank hawks continue to push for a rate hike. However, the U.S. data prints due out next week may trump the U.K. event risks as market participants gauge interest rate expectations ahead of the next Federal Reserve interest rate decision on December 17, and the bullish sentiment surrounding the greenback may gather pace going into the end of the year should the developments boost interest rate expectations.
With that said, the downside targets for GBP/USD remain favored as price and the Relative Strength Index (RSI) retain the bearish trends from back in July, and another batch of positive data prints out of the U.S. may generate fresh monthly lows in the exchange rate as market participants see the Fed normalizing monetary policy ahead of the BoE.
GOLD Fundamentals (based on dailyfx article)
Fundamental Forecast for Gold: NeutralDespite the ‘No’ vote on the Swiss Referendum, Gold prices are higher this week with the yellow metal rallying more than 1.9% to trade at $1189 ahead of the New York close on Friday. Gains early in the week were pared as improving US economic data and persistent strength in the greenback continued to pressure gold lower. Despite the late-week spill however, prices closed higher on the week with bullion looking to end the week just above near-term support.
The US Non-Farm Payrolls release on Friday spurred a steep sell-off in gold after the print topped consensus estimates with a blowout read of 321K and an upward revision of last month’s print to 236K. As a result, gold remains vulnerable to U.S. dollar strength on expectations that the Federal Reserve will be looking to move on interest rates amid the improving US economic outlook. Looking ahead to next week, traders will be eyeing US retail sales report and the University of Michigan Confidence survey for further guidance especially ahead of the FOMC interest rate decision on December 17. Another batch of positive U.S. data may heighten the bullish sentiment surrounding the greenback, which could continue to cap the near-term advance in bullion.
From a technical standpoint, Monday’s rally into $1220 completed a 100% extension off the November low and we’ll maintain more neutral stance heading into next week while noting a medium-term constructive outlook while above $1175/80. A move below this threshold leaves the trade vulnerable with subsequent support targets seen at $1165 and the December opening range low at 1142. A breach of the highs eyes objectives at $1237, $1248 and key resistance at $1262/68.
EUR/USD trading forecast for Monday (based on binarytribune article)
Friday’s trade saw EUR/USD within the range of 1.2271-1.2393. The daily low has also been the lowest level since August 16th 2012. The pair closed at 1.2379, gaining 0.01% on a daily basis, while losing 0.58% for the whole week.
FundamentalsEuro zone German industrial output
Germany’s seasonally adjusted index of industrial production probably fell 0.2% in October compared to a month ago, according to market expectations, following a 1.4% expansion in September. Annualized industrial output contracted 0.1% in September, after another 1.9% decline in August. The index reflects the change in overall inflation-adjusted value of output in sectors such as manufacturing, mining and utilities. In case industrial output shrank more than anticipated, this would mount selling pressure on the euro. Destatis is to publish the official data at 7:00 GMT on Monday.
Sentix Investor SentimentConfidence among investors in the Euro zone probably continued to worsen during the current month, with the corresponding index coming in at a reading of -13.5. In November it stood at -11.87. If so, this would be the fourth consecutive month, during which the gauge occupied negative territory. The index is based on results from the SENTIX survey, one of the most prominent surveys, reflecting investors’ opinion in Germany. It encompasses 2 800 respondents, with 510 of them being institutional investors. Respondents present their expectations regarding ten different markets for a period of one and six months. Readings above zero indicate that respondents were predominantly optimistic, while readings below zero show pessimism. Lower-than-expected readings would have a bearish effect on the common currency. The official index value is due out at 9:30 GMT.
ECB Draghi remarksAt the press conference on Thursday European Central Bank President Mario Draghi noted that bank policy makers would wait until early next year in order to determine whether Euro area economy is in need of additional monetary stimulus.
ECB Governing Council expects to take into consideration a proposal to widen the bank’s asset purchases, meaning the inclusion of sovereign debt, at the upcoming policy meeting on January 22nd, Bloomberg reported.
”We’re looking for the euro to go down to $1.07 by the end of 2015,” Marvin Barth, head of European foreign-exchange strategy at Barclays Plc in London, said on Friday in an interview with Bloomberg Television. ”You’ve reached a tipping point in people’s expectations to where the euro is likely to go. The ECB is providing a significant amount of accommodation in conjunction with negative deposit rates.”
Pivot Points
The central pivot point for the pair is at 1.2348. In case EUR/USD manages to breach the first resistance level at 1.2424, it will probably continue up to test 1.2470. In case the second key resistance is broken, the pair will probably attempt to advance to 1.2546.
If EUR/USD manages to breach the first key support at 1.2302, it will probably continue to slide and test 1.2226. With this second key support broken, the movement to the downside will probably continue to 1.2180.
The mid-Pivot levels for Monday are as follows: M1 – 1.2203, M2 – 1.2264, M3 – 1.2325, M4 – 1.2386, M5 – 1.2447, M6 – 1.2508.
In weekly terms, the central pivot point is at 1.2385. The three key resistance levels are as follows: R1 – 1.2500, R2 – 1.2620, R3 – 1.2735. The three key support levels are: S1 – 1.2265, S2 – 1.2150, S3 – 1.2030.
Forex - Weekly outlook: December 8 - 12
The dollar rallied to fresh multi-year highs against a basket of other major currencies on Friday after a particularly strong U.S. employment report prompted investors to bring forward expectations for a hike in U.S. interest rates.
The Labor Department reported that the U.S. economy added 321,000 jobs in November, far more than the 225,000 forecast by economists and the largest monthly increase in almost three years.September’s figure was revised up to 243,000 from a previously reported 214,000 and the unemployment rate remained unchanged at a six-year low of 5.8%.
The unusually strong data saw investors bring forward expectations for the first hike in U.S. interest rates to mid-2015 from September 2015 before the report.
The dollar has strengthened in recent months on the back of the diverging monetary policy stance between the Federal Reserve and central banks in Europe and Japan, who are expected to continue monetary easing.
The U.S. dollar index, which measures the greenback against a basket of six major currencies, hit a peak of 89.50, the strongest level since March 2009 and ended the day up 0.82% to 89.39.
USD/JPY hit seven year highs 121.69 and was last at 121.43, up 1.38% for the day. For the week, the pair jumped 2.17%.
EUR/USD fell to two-year lows of 1.2272 and settled at 1.2281, off 0.78% for the day.
The euro had moved broadly higher on Thursday after European Central Bank President Mario Draghi indicated that it would not embark on quantitative easing for now, saying the bank would reassess its stimulus program in the first quarter of 2015.
Sterling fell to 15-month lows, with GBP/USD down 0.56% to 1.5583 in late trade, while USD/CHF ended at 18-month highs of 0.9790.
The Canadian dollar fell to more than five year lows against the greenback on Friday, following the release of unexpectedly weak domestic jobs data.
Statistics Canada reported that the Canadian economy shed 10,700 jobs last month, compared to expectations for jobs growth of 5,300.
USD/CAD hit highs of 1.1476 before pulling back to 1.1435 in late trade, still up 0.46% for the day.
In the week ahead investors will be awaiting Thursday's U.S. data on retail sales and jobless claims and Friday’s report on consumer sentiment for further indications on the strength of the economic recovery.
China is to produce what will be closely watched reports on trade, consumer prices and industrial production. Central banks in New Zealand and Switzerland are also to hold policy setting meetings next week.
Monday, December 8
- Japan is to release final data on third quarter gross domestic product and a report on the current account.
- China is to publish data on the trade balance, the difference in value between imports and exports.
- Switzerland is to publish reports on retail sales and
consumer price inflation, which accounts for the majority of overall
inflation.
- Later Monday, Canada is to produce data on building starts and housing permits.
Tuesday, December 9- Australia is to publish private sector data on business confidence.
- The UK is to publish a report on industrial and manufacturing production.
Wednesday, December 10- Australia is to produce private sector data on consumer sentiment, as well as official data on home loans.
- Japan is to report on its BSI manufacturing index.
- China is to publish data on the consumer price index.
- The U.K. is to release data on the trade balance.
- Later in the day, the Reserve Bank of New Zealand is to
announce its benchmark interest rate and publish its rate statement,
which outlines economic conditions and the factors affecting the
monetary policy decision. The announcement is to be followed by a press
conference.
Thursday, December 11- Japan is to release data on core machinery orders and tertiary industry activity.
- RBNZ Governor Graeme Wheeler is to testify before the
Finance and Expenditure Select Committee in Wellington. His comments
will be closely watched.
- Australia is to publish data on the change in the number of people employed and the unemployment rate.
- The Swiss National Bank is to announce its libor rate and
publish its monetary policy assessment. The bank is to hold a press
conference to discuss the monetary policy decision.
- Later Thursday, Bank of Canada Governor Stephen Poloz is to speak at an event in New York.
- The U.S. is to release data on retail sales, the government
measure of consumer spending, as well as the weekly report on jobless
claims.
Friday, December 12USD/JPY weekly outlook: December 8 - 12
The dollar rose to fresh seven-year peaks against the yen on Friday after data showing that the U.S. economy added jobs at the fastest rate in nearly three years last month underlined the diverging monetary policy stance between the Federal Reserve and the Bank of Japan.
The U.S. economy added 321,000 jobs in November the Department of Labor said, far more than the 225,000 forecast by economists and the largest monthly increase in almost three years.
September’s figure was revised up to 243,000 from a previously reported 214,000 and the unemployment rate remained unchanged at a six-year low of 5.8%.
USD/JPY hit peaks of 121.69, the most since July 2007 and was at 121.43 in late trade, 1.38% higher for the day. For the week, the pair jumped 2.17%.
The particularly strong jobs report prompted markets to bring forward expectations for the first hike in U.S. interest rates to mid-2015 from September 2015 ahead of the data. In contrast, the BoJ unexpectedly expanded its stimulus program in late October.
The yen remained weaker after Japanese media outlets reported Thursday that Prime Minister Shinzo Abe's coalition government could retain its majority in the lower house of parliament in elections due to be held on December 14.
Abe dissolved parliament last month, clearing the way for elections to seek a fresh mandate for his economic policies, which call for a weaker yen. The decision came after
Japan’s economy unexpectedly fell into recession in the third quarter.
The euro rose to six-year highs against the yen on Friday, with EUR/JPY at 149.23 in late trade.
The single currency was boosted after European Central Bank President Mario Draghi said Thursday that it would not embark on quantitative easing for now, saying the bank would reassess its stimulus program in the first quarter of 2015.
Meanwhile, the U.S. dollar index, which measures the greenback against a basket of six major currencies, hit a peak of 89.50, the strongest level since March 2009 and ended the day up 0.82% to 89.39.
In the week ahead investors will be awaiting Thursday’s U.S. data on retail sales and jobless claims and Friday’s report on consumer sentiment for further indications on the strength of the economic recovery. Japan is to publish revised data on third quarter economic growth on Monday.
Monday, December 8
- Japan is to release final data on third quarter gross domestic product and a report on the current account.
Wednesday, December 10- Japan is to report on its BSI manufacturing index.
Thursday, December 11- Japan is to release data on core machinery orders and tertiary industry activity.
- The U.S. is to release data on retail sales, the government
measure of consumer spending, as well as the weekly report on jobless
claims.
Friday, December 12USD/CAD weekly outlook: December 8 - 12
The U.S. dollar rose to more than five-year highs against the Canadian dollar on Friday following the release of a particularly strong U.S. jobs report and unexpectedly weak Canadian employment data.
The U.S. economy added 321,000 jobs in November the Department of Labor said, far more than the 225,000 forecast by economists and the largest monthly increase in almost three years.
September’s figure was revised up to 243,000 from a previously reported 214,000 and the unemployment rate remained unchanged at a six-year low of 5.8%.
The report also showed that average hourly earnings rose by a larger than forecast 0.4% and were 2.1% higher on a year-over-year basis.
The unusually strong jobs report prompted markets to bring forward expectations for the first hike in U.S. interest rates to mid-2015 from September 2015 ahead of the data.
At the same time, Statistics Canada reported that the Canadian economy unexpectedly shed 10,700 jobs last month, following two months of strong jobs growth.
Economists had expected the economy to create 5,300 jobs.
The Canadian unemployment rate ticked up to 6.6% from 6.5% in October, in line with expectations.
USD/CAD hit highs of 1.1476, the most since July 14, 2009 before pulling back to 1.1435 in late trade, still up 0.46% for the day.
The U.S. dollar index, which measures the greenback against a basket of six major currencies, hit a peak of 89.50, the strongest level since March 2009 and ended the day up 0.82% to 89.39.
In the week ahead investors will be awaiting Thursday’s U.S. data on retail sales and jobless claims and Friday’s report on consumer sentiment for further indications on the strength of the economic recovery.
Monday will bring a look at Canada’s housing sector, but the economic calendar is light for the rest of the week, with no major economic reports scheduled for release.
Monday, December 8
- Canada is to produce data on building starts and housing permits.
Thursday, December 11- Bank of Canada Governor Stephen Poloz is to speak at an event in New York; his comments will be closely watched.
- The U.S. is to release data on retail sales, the government
measure of consumer spending, as well as the weekly report on jobless
claims.
Friday, December 12AUD/USD weekly outlook: December 8 - 12
The Australian dollar ended Friday's session at the lowest level in more than four years against its U.S. counterpart, after data showed that the U.S. economy added much more jobs than expected last month, underlining the view that the Federal Reserve will move closer to raising interest rates.
AUD/USD fell to 0.8309 on Friday, the pair's lowest since June 2010, before subsequently consolidating at 0.8311 by close of trade on Friday, down 0.87% for the day and 2.25% lower for the week.
The pair is likely to find support at 0.8261, the low from June 10, 2010, and resistance at 0.8428, the high from December 4.
The U.S. dollar rallied after the Department of Labor said that the U.S. economy added 321,000 jobs in November, far more than the 225,000 forecast by economists and the largest monthly increase in almost three years.
October’s figure was revised up to 243,000 from a previously reported 214,000, while the unemployment rate remained unchanged at a six-year low of 5.8%.
The upbeat data added to the view that the strengthening economic recovery may prompt the Federal Reserve to raise interest rates sooner than markets are expecting.
The US dollar index, which measures the greenback against a basket of six major currencies, hit a peak of 89.50, the strongest level since March 2009 and ended the day up 0.82% to 89.39.
Meanwhile, in Australia, the Reserve Bank of Australia left interest rates unchanged at a record-low 2.5% on Tuesday and reiterated its intention to keep borrowing costs at record low levels for an extended period of time.
On Wednesday, data showed that Australia's economy expanded 0.3% in the third quarter, below expectations for a gain of 0.7%. Year-on-year, gross domestic product rose 2.7%, compared to expectations for an expansion of 3.1%.
Reports on Thursday showed that retail sales rose 0.4% in October, more than the expected 0.1% gain, while the country's trade deficit narrowed to A$1.132 billion in October from A$2.23 billion in September.
In the week ahead investors will be awaiting Thursday's U.S. data on retail sales and jobless claims and Friday’s report on consumer sentiment for further indications on the strength of the economic recovery.
China is to produce what will be closely watched reports on trade, consumer prices and industrial production in the week ahead. The Asian nation is Australia's largest trade partner.
Monday, December 8
- China is to publish data on the trade balance, the difference in value between imports and exports.
Tuesday, December 9- Australia is to publish private sector data on business confidence.
Wednesday, December 10- Australia is to produce private sector data on consumer sentiment, as well as official data on home loans.
- China is to publish data on the consumer price index.
Thursday, December 11- Australia is to publish data on the change in the number of people employed and the unemployment rate.
- The U.S. is to release data on retail sales, the government
measure of consumer spending, as well as the weekly report on jobless
claims.
Friday, December 12