Weekly Market Update 10/07/2016-15/07/2016
Last week the Japanese Yen was the currency that had the best performance against the Greenback in the major group of currencies. UsdJpy slid 189 pips to 100.57 (-1.88% weekly), just 160 pips above its 2016 low. Beneath 100 the Bank of Japan may sell Japanese Yen in the market, considering that uncertainty regarding the upper house election triggered conservative trades by Japanese financial institutions. Mr. Abe Coalition, according to data released on Sunday evening CET, should have won the necessary majority to change the constitution. The reversal of the Japanese Yen positive trend could materialize soon. The US dollar lost ground also against both Kiwi and Aussie dollar. NzdUsd rose 127 pips to 0.7297 (+1.77% weekly) and AudUsd gained 66 pips to 0.7563 (+0.88% weekly). The British Pound was again the biggest loser against the Greenback as post Brexit referendum evaluations have not fully priced in the currency market. The optimism seen on stock indices, where the FTSE100 for example is above Pre Brexit levels, has been rarely seen on the British Pound as the currency slid for 3 consecutive weeks. Internal and external political instability, a rate cut of the BoE that will materialize soon and expected deficit that helped to lose the AAA Credit Rating would keep high the volatility of the British Pound in the medium term. Also, in the financial community there are portfolio managers that believe that UK won`t leave the EU. If this expectation would be contagious the Pound Sterling could make a sharp retracement of the bearish wave triggered last month.
GbpUsd dropped 307 pips to 1.2939 (-2.32% weekly), and GbpJpy did even worse with a loss of 569 pips to 130.01 (-4.2% weekly). EurUsd lost 88 pips to 1.1048 (-0.79% weekly) and UsdChf rose 90 pips to 0.9817 (+0.92% weekly). The Canadian dollar found a static resistance in area 1.31 and closed at 1.3036 (+0.91 weekly). In the commodity market Soft commodities and precious metals were the best groups. Silver is trading in a very interesting area as it may rise above the 200SMA weekly; the commodity closed at 20.2 $/oz (+3.89% weekly). Gold rose to 1,365.99 (+2.12% weekly). Selloff on Crude Oil that closed at 45.65 $/barrel (-7.9% weekly). The risk appetite seen on equities left the energy market as those market reacts differently to macroeconomic events and expectations. In US the S&P500 gained 26.95 points in 4 trading sessions to 2,129.9 (+1.28% weekly). The expectations of a FED rate hike decreased and bulls believe that a dovish monetary policy will be kept in the medium term as the Index is less than 10 points from its record high reached last year. The technical proof is that there were several bullish spike anytime the Index retraced but few bearish spike when it was at levels close to record high. This analysis means that the Index spent several time near its record thus its value was accepted by market participant. The market acceptance can bring new buyers to increase the positive view or existing traders can increase their positions. A reversal needs to be triggered by an aggregate change of opinion, and is needed a strong opposite catalyst. In Japan the Nikkei225 lost 575 points to 15,106.98 (-3.67% weekly) and in Europe the FTSE Eurofirst300 lost 17.3 points to 1,296.02 (-1.33% weekly). On Monday will be held the Eurogroup meeting (time n/a) and on Tuesday at 09:00 GMT will be the turn of the UK Inflation Report Hearings (09:00 GMT). On Wednesday at 09:00 GMT Eurozone Industrial Production will be the most relevant event during the European session. At 14:00 GMT the Bank of Canada will decide the interest rate level and will release a statement as well. It seems likely that BoC Poloz will keep interest rates at 0.5%. At 14:30 GMT will be the turn of EIA Crude Oil Stocks change and then on Thursday at 11:00 GMT the Bank of England would decide the interest rate level. Mark Carney probably would cut rate to zero and would be interesting to see the change of opinion expressed by the Monetary Policy Committee. On Friday the Asian session will be see high volumes as at 02:00 GMT Chinese GDP data and Retail Sales could decide the direction of risk appetite. The European session will kick off with Eurozone Trade Balance and Consumer Price Index at 09:00 GMT. At 12:30 GMT US Retail Sales data and at the same time will be release US CPI data. US Baker Hughes Oil Rig Count at 17:00 GMT will be the last event in the calendar.
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