Once again the news out of the Euro region is dominated by the tensions in Ukraine. It appears the area is heading towards a serious conflict as Russia has vowed to defend its citizens and Ukraine re-imposes conscription and sends troops into the troubled eastern regions.
In terms of economic news, Spain reported a lift in their GDP to 0.4% from the previous quarter’s 0.2% and manufacturing PMI showing expansion at 52.7. For the Euro region as a whole, the money supply showed expansion of 1.1% from the previous year and unemployment was down slightly to 11.8% from 11.9%. Manufacturing PMI also gave the Euro a boost, showing expansion at 53.4.
Looking at technicals, we can see the bullish trend is still the dominating factor and the price touched this during the week and bounced off it. Price action seems to be consolidating, possibly looking for direction from the ECB before making any big moves.
Resistance can be found at 1.3888, 1.3905 and 1.3966, while support will be found at 1.3773 and 1.3671 with the bullish trend acting as dynamic support.
Overall, the situation is looking very positive in the UK and the manufacturing PMI is a good example of this, beating market expectations to post a figure of 57.3, up from 55.3 a month earlier. The Construction PMI was down slightly from a month before but is still at a very robust level of 60.8, underlining the strength in the UK recovery.
GDP figures out of the UK show strong economic activity for the first quarter of 2014 with 0.8%, compared to 0.7% the previous quarter. House prices are up 10.9% from a year earlier, however mortgage approvals dipped slightly.
The interest rate announcement is due this week, however the market is expecting it to be held level at 0.5%.
We maintain bullish on the GBPUSD pair as the fundamentals look robust for the UK and the bullish trend line is still in play. It has not been tested in several weeks, so a pull back towards it is certainly possible but overall the sentiment is bullish.
Resistance was met at 1.6917 and beyond this, resistance levels may no longer be relevant as they have not been tested in several years. Support is found at 1.6818, 1.6761 and 1.6660, however, look for the bullish trend line to act as dynamic support.
The Bank of Japan Governor Haruhiko Kuroda refrained from adding more stimulus, as expected by the markets. But his comments have added speculation that the Bank of Japan is not prepared to add any stimulus in the near term. The BoJ is forecasting prices to rise by 1.9% this year and 2.1% next year, leading many in the market to abandon their forecasts of a boost to stimulus this year.
The Unemployment rate for Japan was steady at 3.6% and the level of job applications was even at 1.1%. Preliminary industrial production was up from last month’s -2.3% to 0.3%, however missed forecasts of 0.5%. Retail sales saw a big boost, up 11.0% for the year from 3.6%. The increase in the sales tax would no doubt have an impact on sales figures as people stockpiled before the tax and are paying more after it.
Technicals show a consolidation in the price as it looks to range and form a pennant shape. Resistance is found at 23.6% level or around 103.33. Further up, resistance is also found at 104.10 and 105.42. The bearish line of the pennant could also act as dynamic resistance. Support is found near current levels of 101.90, 101.17 and 100.75. Look for the bullish line of the pennant to act as dynamic support.
The Australian dollar was flat over last week as it started to move near the current trend line and at one stage, managed to test it heavily. However, market optimism was strong with PPI up to 0.9%.
Markets this week will be extremely busy with Australia as a raft of data comes out, including: building approvals, trade balance, interest rate target, retail sales and the unemployment rate. Also, China’s CPI data is due out at the end of the week and this will weigh heavily on the Australian economy.
From a technical standpoint, bullish sentiment still remains strong at present and it’s likely we will see markets lift further. The RSI was flat after last week as the markets consolidated, but there is no reason for further drops given the RBA’s lax attitude when it comes to markets.
Market resistance can be found at 0.9300, 0.9360 and 0.9413; with 0.9300 likely to act as the heavy resistance the market will need to crack through for further rises. Support levels can be found at 0.9255, 0.9160 and 0.9096 and are unlikely to be tested unless there is a breakdown of the present trend line.
The Kiwi dollar had a strong week with positive data across the board, but only just beating expectations. It was heavily affected by US weakness which surprisingly pushed it higher to end the week positive.
Looking ahead, the Kiwi is likely to encounter heavy trading come Tuesday as unemployment data is set to come out, with many economists expecting a strong result with a drop from 6.0% to 5.8%. This in turn could lead to a boost for the Kiwi dollar, but prices are still in the record high area though.
The Kiwi dollar, technically speaking, is still looking bearish despite the jump upwards, with markets unlikely to hold ground here and instead range downwards after Tuesday’s unemployment result. The Stoch is showing very high momentum and we expect this to taper off after unemployment data.
Current resistance levels can be found at 0.8742 and 0.8688; with heavy resistance likely at 0.8742. Support levels can be found at 0.8623, 0.8556 and 0.8947; and are likely to be heavily tested in the coming week.
Gold futures fell last week before jumping sharply on nonfarm data which showed growth in the economy, however, participation rates fell heavily, with a loss of 800,000 jobs. Ukrainian tensions also weighed heavily on the Gold markets as tensions still simmer.
The week ahead is set to be very data heavy with Australia, China and the US dominating data. Expect a strong reaction from Gold markets over China’s CPI data.
Current market technicals show a breakdown of the bearish trend line. This was in response to the heavy movements from nonfarm payroll. However, markets seem hesitant to crash through the 1300 mark and it’s currently acting as heavy resistance for further moves higher.
Market resistance levels can be found at 1300.50, 1316.71 and 1328.78; with 1300 acting as heavy resistance. Support levels can be found very tight at 1284.28, 1278.25 (38.2 fib) and 1268.07; with 1278.25 acting as hard support on the 38.2 fib level.