Hi Traders!
Forex Weekly Recap for 04–08 September, 2023:
Fundamentals
The European Central Bank's (ECB) President Lagarde noted that she is focused on inflation expectations and keeping them in check. She also noted that it will be critical for central banks to keep inflation expectations firmly anchored while these relative price changes play out.
The Reserve Bank of Australia (RBA) left the interest rate unchanged at 4.10%, as expected.
RBA’s Lowe gave his final speech as governor, as Deputy Governor Bullock is due to take over as the new head on September 18. Key mentions from him were:
1. It is possible that Australia can sustain unemployment rates below what they have had over the past 40 years.
Interest rates influence housing prices, but they are not the reason Australia has some of the highest prices in the world.
2. The issue that defined his term more than any other was forward guidance on rates during the pandemic.
The Federal Reserve's Waller changed his stance, and he’s now leaning towards a pause on the next interest rate decision. Other key mentions from him were:
1. The jobs data last week showed the job market is starting to soften.
2. Unemployment is about where it was a year ago, so change isn't that big.
3. The data will determine whether the Fed hikes again.
The Bank of Japan’s (BoJ) Takata noted that he is optimistic about hitting the inflation target but remains wary of downside risks. Other key mentions from him were:
1. Japan is seeing early signs of hitting 2% inflation.
2. Japan's economy is recovering moderately.
3. There are signs of change in Japan's trend inflation as rising wages push up inflation expectations.
The Bank of England’s (BoE) Bailey noted that he is expecting a "marked" fall in inflation by year-end. Other key mentions from him were:
1. Wage bargaining has surprised to the upside.
2. Many indicators are signalling a fall in inflation, which will be marked by the end of this year.
The Bank of Canada's (BoC) Governor Macklem delivered his speech at their policy decision meeting. Key mentions from his speech were:
1. They are concerned that progress in bringing down inflation has slowed.
2. They are prepared to raise rates again but don't want to raise them more than they have to.
3. The longer they wait, the harder it is likely to be to reduce inflation.
4. The weakness in second-quarter GDP largely reflected a broad-based slowing in consumer spending and a decline in housing activity.
5. They will take decisions meeting by meeting.
6. They are expecting growth of 'a little less than 1%' over the next few quarters.
7. They expect headline inflation to go up in the near term before it eases.
Key Data
The Eurozone July PPI came in better than expected across the board:
PPI M/M came in better at -0.5% vs. -0.6% expected and -0.4% prior.
PPI Y/Y came in better at -7.6% vs. -7.6% expected and -3.4% prior.
The Australian GDP Q2 came in better at 0.4% vs. 0.3% expected and 0.4% prior.
The Eurozone's July retail sales came in mixed across the board:
Retail sales M/M came in worse at -0.2% vs. -0.1% expected and 0.2% prior (revised from -0.3%).
Retail Sales Y/Y came in better at -1.0% vs. -1.2% expected and -1.0% prior (revised from -1.0%).
The US ISM Services PMI came in better at 54.5 vs. 52.5 expected and 52.7 prior.
The Eurozone Q2 final GDP reading came in worse at 0.1% vs. 0.3% expected as the previous estimate was revised to 0.1%.
The US jobless claims came in better across the board:
Initial claims came in better at 216K vs. 234K expected and 228K prior.
Continuing claims came in better at 1679K vs. 1715K expected and 1725K prior.
Japan's July average cash earnings growth came in worse, which is some concern for the Japanese economy.
Average cash earnings Y/Y came in worse at 1.3% vs. 2.3% prior.
Real wages Y/Y came in at -2.5%.
Household spending came in worse at -5.00% vs. -4.2% prior.
The Japanese final Q2 GDP came in worse across the board:
Japan's Q2 GDP came in worse at 1.2% vs. 1.3% expected and 0.8% prior (revised from 1.5%).
GDP growth annualised came in worse at 4.8% vs. 5.5% expected and 3.2% prior (revised from 6%).
The Canadian Jobs Report came in better across the board:
Employment change came in better at 39.9K vs. 20.0K expected and -6.4K prior.
Full-time came in better at 32.2K vs. 1.7K prior.
Part-time came in better at 7.8K vs. -8.1K prior.
Technicals
Due to the very strong data out of the US this week, the US dollar strengthened against its major counterparts.
AUDUSD 1W Chart
AUDUSD tested the 2023 low at 0.63646 and went below it by a few pips, but there was a lack of momentum to take it further down. The market is currently holding near the new low and is still nearing its 2022 low at 0.61702. A hold at this area, and there is still a possibility of a possible retest of the triangle trendline support break.
USDJPY 1W Chart
Another strong week for USDJPY, as the pair is now comfortably above the 147 handle. The psychological resistance level of 150 looks to be the next big target level.
EURUSD 1W Chart
EURUSD has continued to head downwards after the support break of the rising wedge. The market has now reached the 1.07000 area and had a small bounce just above the 1.69750 area. The demand zone is around the 1.05000–1.05050 area.
GBPUSD 1W Chart
GBPUSD is continuing to look bearish since the ascending channel break. The market looks to be in a retracement wave; there is a demand zone around the 1.22750–1.23000 area.
The key focus for the upcoming trading week will be:
Tuesday: UK Labour Market Report, German ZEW
Wednesday: Japan PPI, UK GDP, US CPI
Thursday: Australia's Labour Market Report, ECB Policy Decision, US Jobless Claims, US PPI, US Retail Sales
Friday: NZ Manufacturing PMI, Eurozone Wages Data, US University of Michigan Consumer Sentiment
We will be back with another Forex Weekly Recap report next week.
Best of luck for the upcoming trading week ahead. Trade safely and responsibly.
BluetonaFX
Forex Weekly Recap for 04–08 September, 2023:
Fundamentals
The European Central Bank's (ECB) President Lagarde noted that she is focused on inflation expectations and keeping them in check. She also noted that it will be critical for central banks to keep inflation expectations firmly anchored while these relative price changes play out.
The Reserve Bank of Australia (RBA) left the interest rate unchanged at 4.10%, as expected.
RBA’s Lowe gave his final speech as governor, as Deputy Governor Bullock is due to take over as the new head on September 18. Key mentions from him were:
1. It is possible that Australia can sustain unemployment rates below what they have had over the past 40 years.
Interest rates influence housing prices, but they are not the reason Australia has some of the highest prices in the world.
2. The issue that defined his term more than any other was forward guidance on rates during the pandemic.
The Federal Reserve's Waller changed his stance, and he’s now leaning towards a pause on the next interest rate decision. Other key mentions from him were:
1. The jobs data last week showed the job market is starting to soften.
2. Unemployment is about where it was a year ago, so change isn't that big.
3. The data will determine whether the Fed hikes again.
The Bank of Japan’s (BoJ) Takata noted that he is optimistic about hitting the inflation target but remains wary of downside risks. Other key mentions from him were:
1. Japan is seeing early signs of hitting 2% inflation.
2. Japan's economy is recovering moderately.
3. There are signs of change in Japan's trend inflation as rising wages push up inflation expectations.
The Bank of England’s (BoE) Bailey noted that he is expecting a "marked" fall in inflation by year-end. Other key mentions from him were:
1. Wage bargaining has surprised to the upside.
2. Many indicators are signalling a fall in inflation, which will be marked by the end of this year.
The Bank of Canada's (BoC) Governor Macklem delivered his speech at their policy decision meeting. Key mentions from his speech were:
1. They are concerned that progress in bringing down inflation has slowed.
2. They are prepared to raise rates again but don't want to raise them more than they have to.
3. The longer they wait, the harder it is likely to be to reduce inflation.
4. The weakness in second-quarter GDP largely reflected a broad-based slowing in consumer spending and a decline in housing activity.
5. They will take decisions meeting by meeting.
6. They are expecting growth of 'a little less than 1%' over the next few quarters.
7. They expect headline inflation to go up in the near term before it eases.
Key Data
The Eurozone July PPI came in better than expected across the board:
PPI M/M came in better at -0.5% vs. -0.6% expected and -0.4% prior.
PPI Y/Y came in better at -7.6% vs. -7.6% expected and -3.4% prior.
The Australian GDP Q2 came in better at 0.4% vs. 0.3% expected and 0.4% prior.
The Eurozone's July retail sales came in mixed across the board:
Retail sales M/M came in worse at -0.2% vs. -0.1% expected and 0.2% prior (revised from -0.3%).
Retail Sales Y/Y came in better at -1.0% vs. -1.2% expected and -1.0% prior (revised from -1.0%).
The US ISM Services PMI came in better at 54.5 vs. 52.5 expected and 52.7 prior.
The Eurozone Q2 final GDP reading came in worse at 0.1% vs. 0.3% expected as the previous estimate was revised to 0.1%.
The US jobless claims came in better across the board:
Initial claims came in better at 216K vs. 234K expected and 228K prior.
Continuing claims came in better at 1679K vs. 1715K expected and 1725K prior.
Japan's July average cash earnings growth came in worse, which is some concern for the Japanese economy.
Average cash earnings Y/Y came in worse at 1.3% vs. 2.3% prior.
Real wages Y/Y came in at -2.5%.
Household spending came in worse at -5.00% vs. -4.2% prior.
The Japanese final Q2 GDP came in worse across the board:
Japan's Q2 GDP came in worse at 1.2% vs. 1.3% expected and 0.8% prior (revised from 1.5%).
GDP growth annualised came in worse at 4.8% vs. 5.5% expected and 3.2% prior (revised from 6%).
The Canadian Jobs Report came in better across the board:
Employment change came in better at 39.9K vs. 20.0K expected and -6.4K prior.
Full-time came in better at 32.2K vs. 1.7K prior.
Part-time came in better at 7.8K vs. -8.1K prior.
Technicals
Due to the very strong data out of the US this week, the US dollar strengthened against its major counterparts.
AUDUSD 1W Chart
USDJPY 1W Chart
EURUSD 1W Chart
GBPUSD 1W Chart
The key focus for the upcoming trading week will be:
Tuesday: UK Labour Market Report, German ZEW
Wednesday: Japan PPI, UK GDP, US CPI
Thursday: Australia's Labour Market Report, ECB Policy Decision, US Jobless Claims, US PPI, US Retail Sales
Friday: NZ Manufacturing PMI, Eurozone Wages Data, US University of Michigan Consumer Sentiment
We will be back with another Forex Weekly Recap report next week.
Best of luck for the upcoming trading week ahead. Trade safely and responsibly.
BluetonaFX