US shutdown enters its third week and it seems that there is no solution in sight. The US senate will now have to expedite the efforts to find a solution to the crisis before the US government reaches its debt ceiling.
In other US news, President Obama chose Janet Yellen to succeed Ben Bernanke as Federal Reserve Chairman. She is expected to maintain the current expansionary policies implemented by the Fed.
US Jobless Claims came in worse than expected, based on the prior week’s data from the Department of Labor. Jobless Claims ballooned by 66,000 to 374,000 and was attributed to the current US government shutdown and a computer system-related backlog in California.
The preliminary University of Michigan Consumer Sentiment dropped to 75.2 in October, the lowest reading since January’s 71.3 reading.
Bank of England decided on Thursday to leave its Official Bank Rate unchanged at 0.50 percent, and its Asset Purchase Facility at GBP375 billion.
UK Manufacturing Production surprisingly contracted 1.2 percent, the most in nearly a year according to the Office for National Statistics on Wednesday. Meanwhile, trade deficit came in more than expected, GBP9.6 billion.
In Canada, a very weak Building Permits figure was reported by Statistics Canada last Monday. Permits sank 21.2 percent on August, falling from the record 21.4 percent gain registered in July. Trade deficit increased slightly to CAD1.3 billion. Meanwhile, Employment Change climbed less than expected, 11,900 (versus 15,300 forecast). On the other hand, Unemployment Rate improved to the lowest in nearly five years, 6.9 percent from the August reading of 7.1 percent.
Commodities
Gold displayed signs of bullish fatigue early this week. Bears took notice and tore down all buying above the $1,300, and bulls quickly retreated. This resulted in four straight days of selling until Friday, pulling price down to its lowest in four months. The risk now is for a move towards the 2013 low (also the three-year low) at $1,180.
Oil has now declined in four out of five weeks and this is bad news for bulls who’ve been trying to aim for a move back toward $110. Just like Gold bulls, Oil bulls struggled on the topside and this paved the way for bears to aim for lower prices, which they succeeded in doing. A sustained break of the $100 level could prove more disastrous.
Currency Pairs
Looking at the weekly chart, EURUSD has been trading close to the 1.3500 level for three weeks now. Bulls must be able to print a strong weekly close at/or above 1.3600-1.3700 to maintain the momentum on their side.
In a matter of a few weeks, GBPUSD has gone from a leader to one of the laggards of the major pairs. Bulls failed close strongly above the 1.6200 level during the prior week, and this opened up the possibility for downside attacks this week. Coupled by a spate of weak UK data, the pair closed the week below 1.6000, a serious indication that bears are increasing their control. If 1.6000 will not be recovered quickly, we could see 1.5600-1.5800 soon.
Thanks to the latest recovery in the Dollar, USDJPY gained considerably this week after playing with fire with the ascending trendline discussed in the previous week. It won’t be smooth-sailing for bulls as they have to contend with sellers around 99.00-100.00.
The Week Ahead
This Monday, we will witness the release of Australia’s Home Loans; China’s New Loans, PPI, and CPI; Switzerland’s PPI; and Eurozone’s Industrial Production. The United States will observe Columbus Day, while Canada will celebrate Thanksgiving Day.
The Reserve Bank of Australia will kick off Tuesday with the disclosure of the latest Monetary Policy Meeting Minutes. This will be followed by UK’s PPI, RPI, and CPI; Eurozone’s and Germany’s ZEW Economic Sentiment; and US Empire State Manufacturing Index.
Economic data release on Wednesday will start very early with New Zealand’s Consumer Price Index. Then, this will be succeeded by UK’s Unemployment Rate, Average Earnings Index, and Claimant Count Change; Eurozone CPI; Canada’s Manufacturing Sales; and US Beige Book.
Thursday would be a rather short news day this week with Australia’s NAB Quarterly Business Confidence; Eurozone Current Account; UK Retail Sales; Canada’s Foreign Securities Purchases; and US Jobless Claims and Philly Fed Manufacturing Index.
Friday will also be a short one with RBA Governor Stevens’ speech; China’s Industrial Production, Gross Domestic Product, and Fixed Asset Investment; BOJ Governor Kuroda’s speech; and Canada’s CPI.
