EURUSD

Federal Reserve Chairman Ben Bernanke announced during the latest FOMC press conference held on Wednesday that the Fed is looking into initiating the unwinding of its $85 billion monthly bond-buying scheme towards the end of the current year.

According to the Federal Open Market Committee, positive developments have been noted in the housing and labor market, including household spending as well as business fixed investment. At the same time, FOMC concurred that the jobless rate remains elevated, although they expect it to taper off later on. Some analysts are now projecting a $20 billion cut in the QE by the third or fourth quarter of this year.

The US Federal Funds Rate was also announced it was maintained at less than 0.25 percent. Philly Fed Manufacturing index surprised the market with an advance of 12.5, following Monday’s equally-surprising Empire State Manufacturing Index reading which stood at 7.8. US CPI remained low at 0.1 percent.

In the UK, Bank of England’s Monetary Policy Committee, for the fifth time, voted 3-0-6, comprising of 3 votes to increase asset purchases and 6 votes to maintain asset purchases at GBP375 billion (or $587 billion). BOE Governor King, along with Fisher and Miles, voted for an increase in the asset purchase, and lost to the majority which expects the economic recovery and that it is “becoming more established.” The MPC also voted 9-0 to maintain rates at 0.50 percent. King will be replaced by ex-Bank of Canada chief Carney this month.

Meanwhile, UK Public Sector Net Borrowing rose less than expected to GBP10.5 billion, thanks to windfall tax payments by Swiss banks. UK Retail Sales in May jumped 2.1 percent, a huge turnaround from the prior month’s -1.1 percent reading.

Commodities

Lack of bullish interest in Gold to thrust through the $1,400 level paved the way to a strong decline this week. Strong selling saw a $120 decline towards fresh lows—levels unseen since September 2010. Gold must make a quick recovery back to $1,400, else bearish momentum would pick up further.

Oil plunged a little over $6 in just three days, after the $99 level failed to gain support from the bulls as pointed out last week. Majority of the fall happened on Thursday and Friday, after several levels, from $98 down to $94, crumbled due to heavy selling pressure. If further selling goes on, a break of $91 would expose $85-$89.

Currencies

EURUSD tumbled during the last three days of this week, after 1.3300 failed to hold on Wednesday and Thursday. It would be interesting to see whether bulls can make up for lost time and prices. 1.3000-1.3100 is the key area to watch.

USDJPY buyers did a spectacular job this week, printing five straight bullish days and recovering most of the prior week’s 550-pip decline. It was an impressive feat and it would be equally fascinating to see whether they could keep up the momentum this coming week. 99-101 is the near-term big barrier.

Except for Thursday, it was a one-way direction for GBPUSD this week, after the very fleeting trip above the 200-day MA around 1.5700. 1.5400 should hold this week to prevent an attack on 1.5100-1.5200.

The Week Ahead

Monday will be very quiet, with only Germany’s Ifo Business Climate coming out as the key economic release.

The pace picks up slightly on Tuesday with the release of UK BBA Mortgage Approvals, UK Inflation Report Hearings; US Durable Goods Orders, S&P/CS Composite-20 HPI, CB Consumer Confidence, and New Home Sales.

On Wednesday, there are GfK German Consumer Climate; UK BOE Financial Stability Report and CBI Realized sales; US Final GDP.

Thursday will be the busiest of the week with the release of New Zealand Trade Balance, ANZ Business Confidence; German Unemployment Change; Euro-area M3 Money Supply; UK Final GDP and Current Account; US Personal Spending and Income, Core PCE Price Index, Pending Home Sales, and Unemployment Claims.

Friday will be relatively busy with Japan’s Tokyo Core CPI; UK Nationwide HPl German Retail Sales; French Consumer Spending; Canada’s GDP; and US revised UoM Consumer Sentiment and Chicago PMI.

Bank of Canada announced last Wednesday that it is leaving its overnight rate target at 1 percent, with the Bank Rate respectively at 1.25 percent and deposit rate at 0.75 percent. The Bank noted that the world economic growth has behaved mainly as expected, but recent economic indicators in Canada showed 2013’s first quarter growth was better than anticipated.  This is the ultimate policy announcement by BOC Governor Carney, who is moving over to the UK to head the Bank of England. Stephen S. Poloz was appointed Governor of the Bank of Canada by the Directors of the BOC last May 2. Beginning this June, Poloz will head the BOC for seven years during his term of office.

In other news, the United States continued to churn out favorable economic data this week. The Conference Board’s Consumer Confidence for May reached 76.2, the highest level in more than five years (expectations of 70.7); the revised version of May’s University of Michigan Consumer Sentiment stood at 84.5 (versus 84.1 expected); and Chicago PMI came in at 58.7, the best reading since March 2012.

Commodities

Gold traded fairly quietly during the first three days of the week, and then it eventually rocketed higher—and fell. Buyers were able to punch through last week’s high but they lacked the firepower to burst through resistance around $1,420. After hitting the week’s high of $1,421, price made a sustained U-turn which managed to erase all of Thursday’s gains, closing the week virtually unchanged at $1,387. This was a big blow to bulls and now they have to protect support around $1,350-70 again.

Oil fared much worse than Gold this week after the former met heavy selling which started just below the $96 level on late Tuesday. The selling snowballed from then on, with oil ending the week on a new low and with a second bearish weekly close targeting the $90 level.

Currencies

EURUSD printed its third weekly higher low and made further recovery this week. Gains were initiated after the touch of the week’s low at 1.2838 last Wednesday spurred buyers to come out and participate. Sellers retreated, leading to gains toward a 1.3060 high. The upside contains a lot of bearish traps, but nevertheless the aim of the buyers is to move towards 1.3200-50 initially.

USDJPY sellers have been dominant all this week, as they were able to confine price hikes to around 102.50 during the mid-week. The battle for control of the 100 level continues next week, with sellers firmly with the starting advantage. A break of this level targets 97 and 98.

GBPUSD printed a new 11-week low but it, too, followed EURUSD higher from Wednesday, rising 225 pips in just two days. Now that the pair is well of the 1.5150 area, buyers must push forward and attempt for a break of 1.5280-1.5300. If successful, this unlocks 1.5450 and higher levels.

The Week Ahead

Unlike the past few weeks, it’s going to be evenly active all throughout this week.

On Monday, Japan will be out with Capital Spending data; Australia has Retail Sales, Company Operating Profits, and ANZ Job Ads; other releases such as China HSBC Final Manufacturing PMI; Spanish, Italian, and UK Manufacturing PMI; Switzerland’s SVME PMI; and US USM Manufacturing PMI.

Tuesday has UK’s BRC Retail Sales Monitor; Australia’s Rate Statement and Announcement, as well as Current Account; Japan’s Average Cash Earnings; Spain’s Unemployment Change; UK Construction PMI and Halifax HPI; Eurozone PPI; US and Canada Trade Balance.

Wednesday has Australia’s GDP; UK, plus Spanish and Italian Services PMI; Eurozone Retail Sales and Revised GDP; US ADP Non-farm Employment Change; Canada’s Building Permits.

Thursday gets busier with the release of Australia’s Trade Balance; Switzerland’s CPI; Germany’s Factory Orders; UK Asset Purchase Facility and BOE Rate Announcement and Statement; ECB Rate Announcement and Press Conference; US Unemployment Claims; Canada Ivey PMI.

Friday remains packed with Australia’s AIG Construction Index; Germany’s Industrial Production and Trade Balance; Switzerland’s Foreign Currency Reserves; UK Consumer Inflation Expectations and Trade Balance; US and Canada Employment data.

During the latest meeting between Group of Seven central bank heads and finance ministers, consensus has been expressed concerning tolerance of the latest Yen weakness. G-7 policymakers stated that the latest recovery developments in Japan and the current exchange rate movements were at the center of their attention in the meetings.

The Yen has slid 15 percent against the US Dollar and is now at its weakest in the last four years. “Everybody watches exchange rate developments,” noted German Finance Minister Wolfgang Schaeuble. “We had a very intense discussion about Japan with our Japanese colleagues.” For his part, BOJ Chief Haruhiko Kuroda expressed that “easing will contribute to achieving our domestic objective of ending nearly 15 years of deflation,” and reiterated that the monthly bond buying is meant to achieve a 2 percent inflation target by 2015. Kuroda further noted that the G-7’s understanding of his policy strategy has increased.

In other news, Canada’s Building Permits increased by 8.6 percent in March following a 1.5 percent gain in the previous month.

Reserve Bank of Australia eased rates to 2.75 percent from 3 percent, while Bank of England maintained rates at 0.50 percent and Asset Purchase Program at GBP375 billion.

US weekly jobless claims made another positive surprise this week, coming in at 323,000 versus expectations of 333,000. This ties up with recent data which showed improved Non-Farm Employment Change and Unemployment Rate (7.5 percent).

 Commodities

For the third consecutive week, Gold failed to make a convincing mark above the $1,480-$1,500 area as buyers were unable to demonstrate a show of force. Price edged lower to reach $1,419 before ending the week with a close around $1,448. The $1,400 level would likely be attacked again if buyers will continue to manifest complacency in the coming weeks.

Oil gunned for its third straight bullish weekly close despite a lackluster trading week. Price slid nearly $3 on a volatile Friday, but a $2 upside pop a few hours ahead of Friday’s  closing bell managed to give oil a bullish end for the week. $97 remains the key to further upside.

Currencies

EURUSD’s mid-week upside thrust failed to breach or even touch the coveted 1.3200 mark. This was followed by a two-day 240-pip decline which resulted in the pair’s end-of-week bearish reversal, culminating in a weekly close below 1.3000 for the first time since late April. This was a tremendous upset for bulls as they have been trying to conquer 1.3200 since April. If 1.2950 breaks next week, traders can expect a move toward 1.2700-1.2800 soon.

Like other major pairs, USDJPY made big moves and powered higher late this week thanks to the latest USD strength. After consolidating below 100 since early April, the pair rocketed up and moved closer to 102 before ending the week ultra-bullish at 101.57. It would be interesting to see whether price will ease back to 99-101 in the following weeks.

With USD strength all around, GBPUSD also suffered a humiliating 270-pip decline during the last two trading days of the week, as buyers were unable to capture 1.5600 for the second week. The decline on Friday pierced through an ascending trendline and price looks set to move down toward 1.5200, especially if 1.5300-50 does not hold.

The Week Ahead

Monday jumpstarts the week with the release of Australia’s Home Loans and NAB Business Confidence; China’s Fixed Asset Investment plus Industrial Production; Switzerland and US Retail Sales. Eurogroup meetings are also scheduled.

On Tuesday, there are New Zealand’s Retail Sales; UK RICS House Price Balance; Germany’s Final CPI and ZEW Economic Sentiment; Euro-area Industrial Production; and ECOFIN meetings.

Wednesday starts very early with Australia’s Annual Budget Release and Wage Price Index; Japan’s Tertiary Industry Activity and Consumer Confidence; Germany, Italy, and France Preliminary GDP; UK Unemployment Rate and Claimant Count Change, along with BOE Inflation Report and BOE Chief King’s speech; Euro-area Flash GDP; Canada Manufacturing Sales; US PPI, TIC Long-Term Purchases, Empire State Manufacturing Index, and Industrial Production.

Thursday will be equally active with New Zealand’s Business NZ Manufacturing Index; Japan’s Preliminary GDP; Euro-area CPI and Trade Balance; Canada’s Foreign Securities Purchases; US CPI, Building Permits,  Housing Starts, Philly Fed Manufacturing Index, and Unemployment Claims.

Friday activity is much less with a few key releases scattered throughout the day such as New Zealand’s PPI; Japan’s Core Machinery Orders; Canada’s CPI and Wholesale Sales; and US Preliminary UoM Consumer Sentiment.

The Bank of Japan has again decided to leave current rates unchanged at 0.10 percent in its latest announcement. BOJ’s chief Kuroda stated that the central bank is implementing monetary easing with the intention of price stability, and not to target foreign exchange. Furthermore, he declared that the BOJ will not halt in buying short-term debt, will continue in buying JGBs in a “balanced way”, and that all Board members agreed that an extension of the current semi-annual review’s forecast period is warranted. BOJ was also of the view that long-term rates could rise when the confidence in financial sustainability wanes.

In other news, US Jobless claims for the prior week surprised the market with a much-better reading than its forecast. According to the Labor Department’s report on Thursday, US jobless weekly claims fell to 339,000, which was lower compared to an expectation of 352,000 and the prior week’s reading of 355,000.

UK’s Office for National Statistics also reported a better-than-expected Preliminary GDP data on Thursday. Gross Domestic Product surprised to the upside with an expansion of 0.3 percent in the first quarter of 2013, avoiding the prospect of a triple-dip recession.

Commodities

After tumbling in the previous two weeks with a total drop of $283, gold made a remarkable recovery this week. Buyers aimed and have achieved to neutralize this week’s slide, closing the week at $1,461 after reaching $1,485 which was just $10 away from the prior week’s top price. In the coming week, buyers must try to overcome the $1,480-$1,500 area.

Compared to gold, Oil did much better in this week’s trading. Oil clinched a smooth climb higher from Wednesday after breaking through the $89.30-50 resistance which held price for nearly two weeks. Oil did so well that it nearly erased all of the losses in the last two weeks. Oil buyers will have to contend next with potential ceiling around $94.70-$95 ahead of higher resistance at $97.70.

Currencies

EURUSD spent most of its 140-pip weekly trading range within the 1.3000s this week. Bulls and bears really fought hard as evident in the quick rejections which occurred in around 1.3090s and 1.2950s. 1.3000 proves to be a very important level and whoever wins in the coming weeks could bring about a potentially lasting move. Beyond 1.2950 and 1.3100, there are 1.2750 and 1.3200 which each side must contend with.

Another week and it was another failure of buyers to clinch the coveted 100 level. The scheduled BOJ Press Conference did not bring anything new to the table. Because of this, Yen bears got disappointed and this helped the pair slide back down to the 98 level. If momentum picks up, the pair could head back to 95 and perhaps even further below.

GBPUSD was very timidly trading during the first three days of this week, but this all changed when the pair blasted higher by nearly 220 pips after the UK GDP data surprised to the upside on Thursday. The better-than-expected data buoyed price until the Friday close, and the pair is on its way to move toward 1.5500-1.5800 in the coming weeks.

The Week Ahead

On Monday, the Asian session will be somewhat quiet as Japanese banks will be closed to observe Showa Day, while Chinese banks will also be closed to observe Labor Day. Later that da y, there are Germany’s Preliminary CPI data, US Personal Spending, US Personal Income and US Core PCE Price Index..

Tuesday is fully-packed as there are New Zealand’s Building Consents and ANZ Business Confidence; Japan’s Household Spending, Manufacturing PMI, Retail Sales, Preliminary Industrial Production, and Unemployment Rate; Australia’s Private Sector Credit; Germany’s Retail Sales, Unemployment Change, and Gfk German Consumer Climate; France’s Consumer Spending; Spain’s Flash GDP; UK’s Net Lending to Individuals; Eurozone CPI Flash Estimate and Unemployment Rate; Canada’s GDP, IPPI, and RMPI.

On Wednesday, China will release its Manufacturing PMI. Other releases include Australia’s HIA New Home Sales; Japan’s Average Cash Earnings; UK’s Nationwide HPI and Manufacturing PMI; US ADP Non-Farm Employment Change, Final and ISM Manufacturing PMI, and US Fed Funds Rate and FOMC Statement.

Thursday, Japan will publish its Monetary Policy Meeting Minutes from BOJ and Monetary Base data. Not long after, there are Australia’s Building Approvals, China’s HSBC Final Manufacturing PMI, Spain’s and Italy’s Manufacturing PMI, UK’s Construction PMI; ECB Rate Announcement and Press Conference; US Unemployment Claims and Trade Balance.

Finally on Friday, there are data releases such as Australia’s PPI, UK Service PMI, EU Economic Forecasts, US Unemployment Rate, US Non-Farm Employment Change, US ISM Non-Manufacturing PMI. Japan will observe Constitution Day on this day.

Officials of the Group of 20 nations or the G-20, primarily composed of finance ministers and also central bankers, convened on Thursday and Friday to discuss market developments and plot the fiscal path moving forward. Japan’s Finance Minister Taro Aso declared that there was no opposition among G-20 nations concerning Japan’s current policies. IMF chief Lagarde even expressed approval of Japan’s monetary policies. Furthermore, US Treasury Secretary Lew confirmed during his discussion with Finance Minister Aso that the monetary policies implemented by Japan were mainly for domestic fiscal purposes.

In other news, a celebrated marathon held in Boston, Massachusetts turned tragic as an unsuspected improvised blast happened near the finish line last Monday. Three people were killed, along with a few dozens that have been injured – 58 of which reportedly remained in the hospital for treatment. In West, Texas, 14 were killed while around 200 people were injured in an explosion at a fertilizer plant.

Commodities

After an impressive fall of $109 during the prior week, Gold fell a massive $174 this week and gold buyers were only able to recuperate a little over half of the decline at the end of the trading week. Gold is now dangerously close to piercing through the 2011 low at $1,308, and bears are surely salivating ahead of another vicious attack at that level. Bulls, on the other hand, must aim for a move above $1,500 this coming week.

Oil did no better than gold as the former also slipped a little over $5, after declining more than $5 and $4 in the last two weeks. Unlike gold though, oil is now sitting in a potential support around $84-$85 which could slow down the attack of the roaring bears.

Currencies

Hats off to EURUSD buyers who made an early effort this week to bring prices higher from the 1.3000 lows. However, all the early gains were quickly neutralized after the sellers have succeeded in arresting the climb right around the 1.3200 area. This resulted in an equally quick decline in prices back towards the 1.3020s – even creating the weekly low right smack at 1.3000 in the process. In the end, the pair was net sold and closed the week at 1.3050.

USDJPY started off the week with a generous decline from the upper-98s. After touching a 95.78 low, discount buyers entered the scene and took price higher in a relatively smooth fashion. The week culminated in a revisit of last week’s high – reaching as high as 99.67 before easing to close the week at 99.47. Bulls must continue to congregate in order to finally breach the 100 level.

GBPUSD remained weak after attempts at a break of 1.5400 easily fizzled out. Buyers were obviously outnumbered as the pair never got near the coveted level this week. With the weekly close near 1.5200, sellers are closer to pressing price back down to the 1.5000 mark. Potential supports are close by, but price action suggests that bear have a good chance of controlling price next week. A clean break of 1.5200 is the key.

The Week Ahead

Monday is pretty much quiet with only US Existing Home Sales as the key economic release on the plate. FOMC Member Dudley and MC Member Tucker are due to give speeches.

On Tuesday, there are Australia’s CB Leading Index; China’s Trade Balance and HSBC Manufacturing PMI; Germany, France, and Euro-area Flash Manufacturing PMI and Flash Services PMI; Italy’s Retail Sales; UK Public Sector Net Borrowing; Canada’s Retail Sales and speech from BOC’s Carney; and US New Home Sales.

On Wednesday, New Zealand will announce its Official Cash Rate along with the RBNZ Rate Statement.  Other critical releases include Australia’s CPI; Germany’s Ifo Business Climate; UK BBA Mortgage Approvals; US Durable Goods Orders; and speech from BOC Governor Carney.

On Thursday, the key economic releases are Spain’s Unemployment Rate; UK Preliminary GDP; and US Unemployment Claims. New Zealand and Australia will celebrate Anzac Day, while Italy will observe Liberation Day.

Finally on Friday, there are data releases such as New Zealand’s Trade Balance; Japan’s Rate Announcement, Policy Statement, and Press Conference, along with Manufacturing PMI and CPI; speech from SNB Chairman Jordan; and US Advance GDP.

With its back against the wall, Cyprus announced a plan to sell EUR400 million worth of gold reserves to finance part of its bailout and avoid bankruptcy. This development comes as the Mediterranean island purportedly requires EUR23 billion, as opposed to the initial estimate of just EUR17 billion to finance its needs. The Cypriot government was left on its own to fund the EUR6 billion gap as other Eurozone member-states have declined to provide more assistance than initially offered.

The sales of Cypriot gold reserves would come in addition to the bank levy directed upon depositors with greater than EUR100,000 placed in Cypriot banks. Cyprus emerged as the very first Eurozone member-state to implement capital controls in order to hinder a bank run.

Commodities

Gold sellers celebrated this week as the yellow metal plunged $109 after bears successfully contained moves to break back above the $1,600 level. The drop is very crucial as Gold is now trading its lowest since July 2011. Any nudge lower could trigger further decline to 2011’s lows which is situated just above the $1,300 level. Buyers should take every chance to bring price back above $1,500 from this point on.

Parallel to gold’s drop, oil also slid hard on Friday, hitting a $90.26 low which is not far away from 2013’s low in the lower-$89s. Given the price action in gold, it’s certainly possible for oil to test even lower, perhaps toward the November 2012 low around $84. After that, next target is mid-2012 low in the lower-$77s.

Currencies

EURUSD struggled to break past March highs in the 1.3130s all week. Having said that, price action remains bullish, but an immediate break of the resistance is required to preserve the momentum. Bulls will have to contend with the defense in the 1.3300 next.

This week, USDJPY came as close as 5 pips from hitting the coveted 100 level, yet it surprisingly failed to do so. Stubborn buyers tried all week but they finally yielded on Friday, and this led to giving up 171 pips of gains as price hit 98.08 before the week ended at 98.38. Sellers are now one step closer to filling the gap and testing the 95 level. A horde of eager bulls are expected to show up until price reaches that level.

GBPUSD made modest gains towards the 1.5400 level, but selling pressure just above this level proved unbearable for the late-week buyers. And so, the pair turned back towards the low-1.5300s, trimming the week’s bullish hard work in the process. It’s the bears’ turn to test the defense by the bulls around 1.5300. A break of this level could bring price back in the 1.5000s.

The Week Ahead

On Monday, BOJ chief Kuroda is slated to give a speech in Tokyo. In terms of economic releases, there are Australia’s Home Loans; China’s Retail Sales, Fixed Asset Investment, Industrial Production and GDP; Euro-area Trade Balance; US TIC Long-Term Purchases and Empire State Manufacturing Index.

On Tuesday, the market will witness the release of RBA’s Monetary Policy Meeting Minutes, New Motor Vehicle Sales; Switzerland’s PPI; UK’s CPI, RPI, HPI, and PPI, BOE Inflation Letter; Italy’s Trade Balance; Germany’s ZEW Economic Sentiment; Euro-area CPI and ZEW Economic Sentiment; Canada’s Foreign Securities Purchases and Manufacturing Sales; US CPI, Housing Starts, Capacity Utilization Rate, Industrial Production, and Building Permits. ECB’s Draghi will also give a speech.

On Wednesday, there are reports including New Zealand’s CPI, UK’s Unemployment Rate, Claimant Count Change, and MPC Meeting Minutes; Switzerland’s ZEW Economic Expectations; Canada’s BOC Rate Announcement and Statement, Monetary Policy Report, and Press Conference; US Beige Book.

On Thursday, there are Australia’s NAB Quarterly Business Confidence, Japan’s Trade Balance, UK Retail Sales, US Philly Fed Manufacturing Index and Unemployment Claims. Today is also the first day of the 2-day G-20 meetings.

Finally on Friday, there are news releases such as Euro-area Current Account, Germany’s PPI, Canada’s Wholesale Sales and CPI. Today is also the first day of the 3-day IMF meetings.