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AUD drifting ahead of retail salesThe Australian dollar started the week with gains of close to one percent but has been mostly drifting since then. AUD/USD is trading quietly, just below the 0.71 line. It hasn't been a very good week on the Australian release front, raising concerns that the economy may be slowing down. Manufacturing and Services PMIs both slowed in May, while Construction Work Done and Private New Capital Expenditure both recorded declines in the first quarter. The week winds up with April Retail Sales on Friday, which is projected to slow to 0.9%, after a 1.6% in March. Australia releases GDP next week, and an underperforming release would likely dampen sentiment towards the Australian dollar. The new Labour government is rolling up its sleeves after its election victory and getting to work. Both Labour and the defeated Liberal party made campaign promises to review RBA operations, including how it targets inflation. The new Treasurer, Jim Chalmers, says he will announce his findings shortly. Chalmers said on Wednesday that he had inherited "very tricky" economic conditions, including rising inflation and interest rates, and a massive trillion-dollar debt. The FOMC minutes didn't contain any surprises, which actually soothed nervous markets. Investors have become increasingly concerned that the US economy might tip into recession. Recent data, such as housing, has been weak, while at the same time that the Federal Reserve has embarked on an aggressive rate-hike cycle aimed at slowing the economy and containing inflation. With inflation still not showing signs of peaking, there have been calls from some Fed officials to deliver a super-super-size 75 bps hike. To the relief of the markets, the minutes appeared to put to rest such a drastic move, as the Fed signalled that it will hike by 50 bps in June and July, followed by a pause in September. This would allow the Fed to monitor the effects of the June and July hikes on the economy and on inflation levels. 0.7118 is a weak resistance line. Above, there is resistance at 0.7196 There is support at 0.6996 and 0.6918
by OANDA
Pound dips below 1.35, Omicron surgesThe British pound has started the New Year in negative territory. GBP/USD has dipped just below the symbolic 1.35 level. The British pound ended 2021 with a winning week, gaining 1.03%. It was the second week in a row in which GBP/USD gained over 1%, as the risk-sensitive pound continued to make inroads against the safe-haven US dollar. On Thursday, GBP/USD rose to 1.3520, its highest level since November 10th. The catalyst driving the pound's rally has been strong risk appetite, which hasn't waned despite the explosion in the number of Omicron cases. The UK has been setting new records of Covid-19 cases as Omicron rages, and a government study estimates that 1 in 10 people in London is infected with Covid. The markets have remained optimistic, noting that Omicron is less severe than previous variants of Covid, but there are concerns that Omicron could lead to a huge strain on hospitals. Meanwhile, industries and transport networks are reporting staff shortages as sick workers self-isolate, which will weigh on activity in the services sector. The government has not introduced new health restrictions, but that could change if hospitalisation rates move higher. Prime Minister Boris Johnson will deliver an update on restrictions later today, and his comments could move the pound. If the government does announce new restrictions, investors could react negatively and extend the pound's losses. After a light economic calendar during Christmas week, there are key events on both sides of the pond this week. The markets will get a look at PMIs in both the US and the UK, and the US releases nonfarm payrolls at the end of the week. The December NFP is expected to jump to 400 thousand, up from 210 thousand in November. GBP/USD has support at 1.3426 and 1.3329 There is resistance at 1.3585 and 1.3647
by OANDA
Pound yawns after mixed UK dataThe British pound continues to have an uneventful week and the lack of activity has continued in the Friday session. GBP/USD has been trading close to the 1.38 level for most of the week and is currently at 1.3804, up 0.09% on the day. UK Retail Sales declined by 0.2% in September. This is a cause for concern, given that retail sales have now declined for three straight months, pointing to ongoing weakness in consumer spending. Retail sales remain subdued despite the relaxation of Covid restrictions in July, which has not resulted in consumers increasing their spending. On a positive note, retail sales remain above the pre-pandemic levels (February 2020). There was better news from the September PMIs. Both the manufacturing and services PMIs accelerated and beat expectations, with readings of 57.7 and 58.0, respectively. This points to strong expansion in both sectors. The markets have priced in a November rate hike, likely by 15 basis points. Although this would be a relatively small increase, it would mark the first rate hike by a major central bank since the Covid pandemic began. BoE Governor Andrew Bailey is poised to raise rates in order to curb inflation, which is running above 3%, well above the bank's target of 2%. A majority of MPC members are expected to follow suit, but a vocal minority of members are warning that the move is unwarranted and could dampen the recovery and hurt growth and jobs. On Thursday the US posted strong employment, manufacturing and housing numbers, which gave the US dollar a much-needed boost. The dollar index continues to trade in a range between 93.50 and 94.00 and is at 93.67 in Europe. A drop below 93.50 could see the index fall to the 0.93 line. On the technical chart, the upside shows a triple top at 1.3830. A close above this line would leave the pair room to climb until resistance at the round number of 1.3900. There are support levels at 1.368 and 1.3492
by OANDA
1
Aussie slides on soft consumer confidenceThe Australian dollar has reversed directions on Wednesday and recorded considerable losses. In the European session, AUD/USD is trading at 0.7750, down 0.52% on the day. Investors gave the Aussie a thumbs down on Wednesday after Westpac Consumer Sentiment fell 4.8% in May. The trend of improving consumer confidence over the past three months was broken. Still, a review of the Westpac report shows a "glass half full" approach, as the report notes that the index dropped from 118.8 to 113.1, its second-highest print since April 2010. The RBA will hold a policy meeting on June 1, and the central bank will announce its plans for Yield Curve Control (YCC) and QE. The Westpac report says that the bank remains committed to monetary stimulus and this means that QE will be extended for a further A$100 billion in September, and YCC policy will shift from April 2024 to November 2o24. The bank has repeatedly said that it has no plans to tighten policy prior to 2024. The market will be treated to a dump of Australian data on Thursday. Consumer Inflation Expectations is first up (1:00 GMT), with a consensus of 3.6%, up from 3.2%. This indicator is closely watched as inflation expectations can translate into actual inflation, so a strong gain would be a signal that inflationary pressures are growing. The highlight will be Employment Change (1:30 GMT), with a small gain of 15.0 thousand expected, down from 70.7 thousand. Australia also releases Manufacturing and Services PMIs (23:00 PMI). Both sectors are in good shape, a testament to the strong Australian economy. Manufacturing PMI is projected at 59.8 and Services at 58.9, which are well into expansionary territory. The 50-level separates contraction from expansion. AUD/USD faces resistance at 0.7887 and 0.7990. On the downside, there are support levels at 0.7684 and 0.7584.
by OANDA
Euro at 1.20, Eurozone Retail Sales eyedThe euro is showing little movement on Wednesday. In the North American session, EUR/USD is trading at 1.2005, down 0.06% on the day. Business activity across the eurozone remains weak, as reflected by eurozone Services PMIs for April, which were released earlier on Wednesday. The German, eurozone and French releases were all close to the 50.0 level, which separates contraction from expansion. This means that the services sectors in the eurozone are not showing growth, as the Covid-19 lockdowns and a sluggish vaccine rollout have taken a heavy toll on the services industry. At the same time, there are some bright spots to report. Manufacturing continues to show significant expansion, and German Retail Sales sparkled in March, with a gain of 7.7%, which crushed the consensus of 2.9%. On Thursday, the eurozone releases Retail Sales for March (9:00 GMT). The forecast stands at 1.5%. Will the indicator follow German retail sales and outperform? Investors will also be keeping a close eye on German Factory Orders for March, which will be released on Thursday (6:oo GMT). German manufacturing has shown prolonged expansion, and Factory Orders has registered only one decline in the past 10 months. The forecast for March stands at 1.5%. In the US, comments by Treasury Secretary Janet Yellen about interest rates caught the attention of investors and sent US equity markets sharply lower on Tuesday. Yellen stated that interest rates may have to rise to prevent the economy from overheating, sending the dollar higher and equities lower. Yellen tried to backtrack on her remarks, saying that she was not predicting a hike in rates. Still, this episode highlights that with the US economy reeling off strong numbers, the Fed may have to revisit its stance that it is premature to even talk about a taper. EUR/USD faces resistance at 1.2108 and 1.2196. On the downside, 1.1975 is an immediate support level. Below, there is support at 1.1930.
by OANDA
Euro falls to 4-mth low despite strong PMIsThe euro continues to head south in Wednesday trading. Currently, EUR/USD is trading at 1.1828, down 0.17% on the day. Just four weeks ago, EUR/USD was basking above the 122 level and looking strong against the US dollar. Fast forward to the present, and the euro is struggling to keep above the 1.18 level as its trades at its lowest level since November 23rd. It's been a dreadful March, with EUR/USD falling 2 percent this month. The main catalyst for the slide against the US dollar has been the significant rise in US Treasury yields, which have boosted the dollar. US 10-year yields rose to 1.73% on Friday, as shade below its 52-week high of 1.75%. If the upward trend resumes, we can expect the euro to lose more ground. Investor sentiment towards the eurozone has been weak, to such an extent that excellent PMI data on Wednesday failed to give the euro a much-needed boost. On the manufacturing front, France, Germany and the eurozone all showed strong growth, highlighted by an outstanding German read of 66.6. Services also showed improvement, although France and the eurozone remain in contraction territory. German Services PMI improved to 50.8, the first time the index has shown growth in seven months. The euro is also under pressure this week over a vaccine dispute with the EU. A shortage of AstraZeneca vaccines across Europe has resulted in a threat by the EU to block shipments of the vaccine to the UK. Such a move would likely send tense relations between the EU and the UK to a new low. The irony of the EU move to hoard vaccines has not been lost in British media, with The Telegraph newspaper publishing a survey which shows that a majority of people in Germany, France, Italy and Spain consider the AstraZeneca vaccine as unsafe. EUR has broken below critical support at 1.1840, where the 200-DMA is also situated. If EUR closes below this level, we can expect further losses, with the next support line at 1.1808. If the downturn continues, it could potentially reach as low as the 1.16 level in the coming days. On the upside, 1.1971 has some breathing room in resistance as EUR loses ground.
by OANDA
19
Euro dips to 4-week low, German Retail Sales slideThe euro is showing limited movement in the European session. Currently, EUR/USD is trading at 1.2035, down 0.10% on the day. The euro hasn't managed a winning day since Thursday, and the pair is perilously close to the 1.20 line, which is a psychologically important level. Germany is the eurozone's largest economy and has traditionally been the economic powerhouse of the bloc. With the eurozone still grappling with the devastating effect of the Covid pandemic, Germany is again being counted on to lift the eurozone to recovery. However, Germany's economy is also showing signs of fatigue. German GDP for Q4 of 2020 showed negligible growth, although the gain of 0.3% managed to beat the street estimate of 0.1%. On Tuesday, German Retail Sales for January came in at -4.5%, after a disastrous -9.6% reading in December. This caught the markets by surprise, as the street consensus stood at +0.2%. The sharp drop in consumer spending can be attributed to the partial Covid-19 lockdown which started back in December. One bright spot in the German and eurozone economies has been the manufacturing sector. In February, German Manufacturing PMI came in at 60.7 and the eurozone read at 57.9, both of which were revised slightly upwards. These figures are well into expansionary territory, and the German release marked a 3-year high. In contrast to the rosy manufacturing numbers, the services industry has lagged behind and remains in contraction mode due to the lockdowns which have curtailed many services. Germany's Services PMI is projected to come in at 45.9, well below the neutral 50-level. EUR/USD faces resistance at 1.2091. Above, there is resistance at 1.2190. On the downside, the pair is putting strong pressure on the 100-day moving average (MA), which is situated at 1.2019. A close below this line would be a technical bearish signal for the pair. The pair is potentially targeting support at 1.1945, which could potentially extend to the round number of 1.1800.
by OANDA