15 May 2017 Weekly Analysis
GCMAsia Weekly Report: May 15 – 19
Market Review (Forex): May 8 – 12
Greenback fell against a basket of major peers on Friday following lackluster US data on inflation and retail sales which disappoints investors expectation for more rate hikes by the Federal Reserve.
Data on Friday shows that US retail sales grew less than expected with only 0.4% for April, a short of economist expectation for an increase of 0.6%. At the same time, annual rate of inflation slowed down to 2.2% in April, as compared to 2.4% in March. Otherwise, annual core inflation which excludes food and energy costs fell to 1.9%, its lowest level since October 2015.
A weaker than expected economic data would raise doubts over whether the Federal Reserve could hike interest rates by two more times as current readings shows some slowdown in US economy.
Similarly, Fed Rate Monitor Tool currently shows that the market is pricing in around 70.6% chance for a rate hike in the month of June following the release of the data.
US Retail Sales
US Retail Sales reads at 0.4%, lower than expected increase of 0.6% for the month of April.
US Inflation Rate
US Inflation rate came in at 2.2% for April, lower than prior month with 2.4%.
US Core Inflation Rate
Core inflation which excludes food and energy came in only at 1.9% for the month of April.
Fed Rate Monitor Tool
Market participants are currently pricing at 70.6% chance of a rate hike in June.
Safe haven yen regains its momentum, with the pair of USD/JPY tumbling 0.43% to 113.37, retreats from two-months high of 114.36.
Euro rose to daily high against the dollar, with EUR/USD up 0.64% to $1.0931.
Sterling was little changed on Friday, with GBP/USD last seen at 1.2888 as of late Friday trade.
Market Review (Commodities): May 8 – 12
Gold prices was a tad higher last Friday, ending the week with little change as weaker dollar increases the appeal for the precious metal. Price of the yellow metal settled up 0.17% to $1,228.23 during late North American trading hours. Greenback took a step back from its appreciation following weaker-than-expected inflation and retail sales reading, which is seen as a setback on the possibility for more interest rate hike from the US Federal Reserve.
Fed Rate Monitor Tool shows that the market is pricing at 70.6% chance for a rate hike in June, slightly lower when compared to the rate before the data was released. Gold price is highly sensitive to rising rates, which could lift the opportunity cost of holding non-yielding assets such as gold.
Oil futures settled flat on Friday but in tandem to register first weekly gain within a month as the likelihood of major oil producers to extend output cuts beyond an agreed June deadline increases as they meet later this month. Price of the black commodity ticked up 1 cent while ended the week at $47.84, nearing previous high of $48.22.
In the recent days, some officials from major producers has signaled the possibility for deeper production cuts to be made in order to clear a supply glut. At the start of the year, OPEC and other producers such as Russia began their production cut by about 1.8 million barrels per day but thus far had little impact on global inventory levels. Uprising in US shale production has derailed their efforts in rebalancing global crude prices as they ramp up active drilling rigs and daily production levels.
Last Friday, energy services company Baker Hughes showed that US drillers has added rigs for 17th week in a row, implying further gains in domestic production ahead. Number of active US rigs increased by 9 to 712, extending its 11-month drilling recovery to its highest levels since August 2015.
U.S. Baker Hughes Oil Rig Count
Active oil drilling rig in US was increased by 9 last week to a total of 712 thus far.
Weekly Outlook: May 15 – 19
For the week ahead, investors will be looking forward for US reports on building permits, housing starts, industrial production and jobless claims for fresh indication on the strength of their economy. Japan is due to report their first quarter growth while UK is bound to produce closely watched inflation, employment and retail sales reading amid signs of headwinds from looming Brexit.
As for oil traders, market participants will continue to eye on fresh weekly information regarding US stockpiles of crude and refined products on Tuesday and Wednesday to gauge the strength of demand from world’s largest oil consumer. Likewise, they will also keep a look out on International Energy Agency which is bound to release their monthly report for further signal on global crude market.
Highlighted economy data and events for the week: May 15 – 19
|Monday, May 15||
NZD – Core Retail Sales (QoQ) (Q1)
NZD – Retail Sales (QoQ) (Q1)
CNY – Fixed Asset Investment (YoY) (Apr)
CNY – Industrial Production (YoY) (Apr)
CHF – PPI (MoM) (Apr)
USD – NY Empire State Manufacturing Index (May)
|Tuesday, May 16||
GBP – CPI (YoY) (Apr)
EUR – German ZEW Economic Sentiment (May)
EUR – GDP (QoQ) (Q1)
USD – Building Permits (Apr)
USD – Housing Starts (Apr)
USD – Industrial Production (MoM) (Apr)
Crude Oil – API Weekly Crude Oil Stock
AUD – RBA Meeting Minutes
Crude Oil – IEA Monthly Report
|Wednesday, May 17||
NZD – PPI Input (QoQ) (Q1)
AUD – Wage Price Index (QoQ) (Q1)
GBP – Average Earnings Index + Bonus (Mar)
GBP – Claimant Count Change (Apr)
EUR – CPI (YoY) (Apr)
CAD – Manufacturing Sales (MoM) (Mar)
Crude Oil – Crude Oil Inventories
|Thursday, May 18||
JPY – GDP (QoQ) (Q1)
AUD – Employment Change (Apr)
GBP – Retail Sales (MoM) (Apr)
USD – Initial Jobless Claims
USD – Philadelphia Fed Manufacturing Index (May)
EUR – ECB President Draghi Speaks
Friday, May 19
CAD – Core CPI (MoM) (Apr)
CAD – Core Retail Sales (MoM) (Mar)
Crude Oil – U.S. Baker Hughes Oil Rig Count
Technical weekly outlook: May 15 – 19
DOLLAR_INDX, Daily: Dollar index remains traded within a downward channel while recently retraced from the resistance level of 99.80. Recent closure below the 20-moving average line (red) suggests dollar index to advance lower, towards the target of support level at 98.85.
Resistance level: 99.80, 100.75
Support level: 98.85, 97.55
GBPUSD, Daily: GBPUSD was traded lower following prior retrace from the strong resistance level of 1.3000 while closing below the 20-moving average line (red). MACD histogram which illustrates downward signal and momentum suggests GBPUSD to extend its losses after breaking the support level of 1.2855.
Resistance level: 1.3000, 1.3130
Support level: 1.2855, 1.2715
USDJPY, Daily: USD/JPY has recently broke out from the top level of downward channel, signaling a change in trend direction to move further upwards. As both MA line continues to expand upwards after the formation of golden cross, a closure above the resistance level of 113.40 would suggest USD/JPY to extend its upward momentum.
Resistance level: 113.40, 114.60
Support level: 112.15, 110.60
EURUSD, Daily: EURUSD remains traded within an upward channel while recently rebounded near the strong support level of 1.0820. As the Stochastic Oscillator illustrates a rebound signal from the oversold region, EURUSD is expected to advance further up, towards the target of resistance level at 1.1020.
Resistance level: 1.1020, 1.1120
Support level: 1.0920, 1.0820
GOLD_, Daily: Gold price was traded higher following prior rebound while traded thinly near the resistance level of 1229.35. As the downward signal from MACD histogram continues to narrow upwards, gold price may be traded higher in the short-term as technical correction. Otherwise, long-term trend direction suggests gold to extend its downward momentum as both MA lines continue to narrow downwards and may form a death cross formation.
Resistance level: 1229.35, 1254.60
Support level: 1208.95, 1188.60
CrudeOIL, Daily: Crude oil price extended its gains following prior rebound from the support level of 45.35. With regards to the MACD histogram which illustrates upward signal and momentum, it is suggested to advance further up, towards the target of resistance level at 49.10.
Resistance level: 49.10, 51.45
Support level: 47.25, 45.35