16/01/06
Comment:
The Dollar was marginally weaker against the major currencies last week. The Euro closed last week at 1.2140 having started the week at 1.2150. US/JPY closed last week at 114.20 having started the week at 114.60. The GBP closed last week at 1.7775 having started the week at 1.7700. The A$ closed the week at 0.7550 having started the week at 0.7530.
last week’s recap
The Dollar strengthened against the major currencies midway through the week, due to the US trade gap narrowing in November. The strength was short-lived as the dollar weakened against the majors due to softer than expected US economic data late in the week. The softer than expected data further raised market expectations that the US Federal Reserve could soon be nearing an end to its rate hike cycle. The euro traded down early in the week, sparked by the ECB President Trichet’s not delivering a hawkish statement at the policy meeting press conference that the market was expecting. However, weak US economic data, plus Trichet comments that were bit more hawkish late in the week help Euro recover. With no major data out of Japan, the currency rallied on the back of the weaker dollar. The Sterling traded down early in the weak on the back of record UK trade deficit but recovered to trade to a 3 week high against the dollar. The Aussie remained well supported despite soft retail sales data combined with blow out in the trade deficit.
The week ahead
The coming week sees the release of December inflation in the US, UK and Eurozone. In the US, analysts expect that the headline inflation rate could push slightly higher with the core rate remaining stable. In the UK and the Eurozone, analysts suggest inflation should ease off compared with November. US manufacturing survey data and UK retail sales should provide the week’s other data highlights.
In the States after big swings in recent months, analysts believe the energy component of the US consumer price index (Wednesday) will be inflation-neutral in December. The rebound in mining output following the hurricane disruption is likely to have continued boosting US industrial production (Tuesday) in December. The market will also pay attention to the forward looking indicators being the New York Fed survey (Tuesday) and Philly fed survey (Thursday). Housing market indicators have started, tentatively, to suggest a cooling in activity and the market will watch the housing starts (Thursday) for further evidence. Analysts expect some further improvement in consumer confidence (Friday).We will provide our previews of these data releases in the daily summary.
In the Eurozone one of the highlights for the week should be Eurozone industrial production for November (Wednesday). The other data release of note will be the Eurozone flash estimate (Thursday).In the UK there are three key reports out over the coming week for the UK economy on inflation, the labour market and retail sales. Analysts expect headline inflation (Tuesday) to falls back slightly. UK unemployment (Wednesday) is expected to rise modestly in December, continuing the recent trend which has seen claimant count rise for the past ten consecutive months. Analysts also expect a pick up in retail sales (Friday).We will provide our previews and reviews of these data releases in the daily summary.
In Japan the coming week provides little in the way of data. Perhaps of most interest will be the BOJ meeting and monthly economic report (Friday).We will provide our previews and reviews of these data releases in the daily summary.
Key Weekly Pivot levels
Initial support at 1.2007 (Jan 12 low) followed by secondary support at 1.1980 (50% retracement of the 1.1778 to 1.2181 advance). Initial resistance is now located at 1.2181 (Jan 6 high) followed by 1.2226 (61.8% retracement of the 1.2590 to 1.1638 decline).
Initial support is located at 113.73 (former resistance from Jul 20) followed by 113.53 (61.8% retracement of the 108.76 to 121.41 advance). Initial resistance is located at 115.23 (38.2% retracement of the 118.18 to 113.41 decline) followed by 115.52 (former support from Dec 19).
Initial support is located at 1.7577 (Jan 12 low) followed by 1.7516 (Jan 11 low). Initial resistance is located at 1.7810 (Dec 14 high) followed by 1.7901 (Oct 27 high).
Initial resistance is located at 0.7580 (Dec 14 high) followed by 0.7605 (Oct 27 high). Initial support is located at 0.7481 (Jan 11 low) followed by 0.7444 (Jan 5 low).
