 |
| Federal Reserve Chairwoman Janet Yellen |
The
health of China’s economy has come under the spotlight in early trading this
week with Chinese President Xi Jinping saying over the weekend that the market
will need to adapt to a “new normal” rate of slower growth for China as, even
though the country is still in a “significant period of strategic opportunity”,
projections indicate the weakest expansion in China’s growth since 1990. This
bold statement from the President had a negative impact on the Asian opening
this week and investors are now keenly waiting for Tuesday’s release of
industrial production and retail sales from China for signs of endemic
weakness.
The
Asian markets are in fact dominating the spotlight early in the week, with the
yen dropping 0.1% after Japan announced a current account surplus of just
¥116.4 billion, much lower than the forecast ¥348 billion and a fraction of
February’s figure of ¥612.7 billion. This disappointing data is only further
fuelling the belief that the Bank of Japan (BoJ) will have to expand their
monetary stimulus by the end of 2014. The market is still yet to see what the
full impact of the rise in sales tax will be and this will likely be the
defining indicator of whether the BoJ is forced to increase the stimulus.
Thursday will see preliminary GDP for Japan released which is likely to
generate yen volatility. The USD/JPY pivot point is 101.94, with resistance
levels at 101.98, 102.03 and 102.08; and support levels at 101.89, 101.85 and
101.80.
Meanwhile,
Australia is bracing for the annual Budget announcement on Tuesday where the
Government is expected to reveal a raft of spending cuts and new levies which
aim to make up a A$123 billion shortfall over four years. This aggressive
economic policy announcement is likely to make waves in Australia and may well
prevent the Reserve Bank of Australia from raising rates in the short term.
Traders should closely watch the Australian dollar for volatility before,
during and after the announcement. The AUD/USD pivot point is 0.9370, with
resistance levels at 0.9375, 0.9379 and 0.9384; and support levels 0.9366,
0.9361 and 0.9357.
The
week ahead for the US includes a number of economic and corporate announcements
that are expected to provide some USD volatility. Tuesday sees the latest
month-on-month retail sales announced with a drop from 1.2% to 0.4% expected,
followed by consumer prices and consumer sentiment data later in the week. No doubt
the Federal Reserve is hoping that these figures will show some signs of
positivity and the results are being eagerly awaited by those who are skeptical
of the health of the US economy. If the data shows any sign of weakness or
deterioration this may well call into question the decision to continue the
current rate of tapering asset purchases. Thursday will see Federal Reserve
Chairwoman Janet Yellen giving an evening speech on small business and the
market will be looking to this speech for any indications of future monetary
policy.
The
euro dropped last week after European Central Bank President Mario Draghi
indicated that he may announce easing as early as next month. As a result the
euro is expected to maintain a downward pressure until the June meeting. This
week sees preliminary data which will indicate first quarter growth and if this
too is disappointing Draghi’s hand may be forced to concede that easing is
necessary. The EUR/USD pivot point is1.3768, with resistance levels at 1.3775,
1.3782 and 1.3789; and support levels at 1.3761, 1.3754 and 1.3747.
Wednesday
will see the latest monthly inflation report released by the Bank of England
and with the UK unemployment rate falling below the 7% threshold in the first
quarter, BoE Governor Mark Carney is expected to be questioned about his plans
to raise interest rates. Although a rise in interest rates is not expected
before Q1 in 2015, a series of strong data releases recently have led some
analysts to believe that an increase may come as soon as the end of this year.
GBP/USD pivot point is 1.6886, with resistance levels at 1.6901, 1.6911 and
1.6926; and support levels at 1.6876, 1.6861 and 1.6851.
What to
Watch this Week:
AUD/USD
should be closely watched during the Australian Federal Budget announcement on
Tuesday and USD/JPY may provide some good opportunities, especially on Thursday
when the preliminary GDP data is released. Yellen’s speech late on Thursday
night should also be monitored as her comments have the potential to influence
the performance of USD pairs.
No comments:
Post a Comment