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WEEKLY OUTLOOK
Monday, 18 Jul 2016
ECB’S MINIMUM BID RATE DECISION THE ONE
TO WATCH; BUSY WEEK FOR THE CABLE;
GDT PRICES TO IMPACT THE KIWI.

Mon 18th July 2016, 06:00 GMT
EURUSD NEUTRAL GBPUSD NEUTRAL
Matthew Ashley & Steven Knight
The Euro initially drifted higher early in the week as the Eurogroup meeting
commenced, but the strength evaporated following the US Retail Sales
figures which proved robust at 0.6% m/m. Subsequently, the Euro Dollar
saw plenty of selling pressure late on Friday to close the week down at
1.1024. Moving forward, keep a close watch on the ECBʼs minimum bid rate
decision as it could provide plenty of volatility for markets.
The Cable was volatile but rose early in the week as news that David
Cameron had resigned and was being immediately replaced by Theresa May
as Prime Minister steadied the markets. In addition, the BoEʼs decision to hold
rates steady was also a surprise and saw the Cable rally somewhat. Although
the pair slipped following Fridayʼs US Retail Sales data, it still managed to
retain most of its gains to close the week out around the 1.3170 mark. On the
news front, watch for the UK Manufacturing and Services PMI results.
USDJPY BEARISH AUDUSD BULLISH
The USDJPY had a strong week as the pair continued to bounce from the
key 100.00 handle with the help of some stronger US economic data and
continued speculation of additional Japanese QE. The speculation over
further QE subsequently drove the Yen lower and saw the pair finish the
week sharply higher around the 104.72 mark. On the news front, watch
for the US Philly Fed Manufacturing Index, due late in the week.
Whilst the strong US results released on Friday did erase a sizeable portion
of the weekʼs gains, the Aussie Dollar closed the week fractionally higher.
The move was largely the result of the strong rally which was seen on
Tuesday in the wake of the NAB Business Confidence result. However, the
weaker US JOLTS Job Openings figure also played a role in Tuesdayʼs
performance. As for this week, both the Australian CB and MI Leading
indices are due which could influence the pair significantly.
NZDUSD NEUTRAL XAUUSD NEUTRAL
In the early stages of last week, the NZD bounced between the 0.7324 and
0.7208 levels strongly as a result of mixed NZ and US results. However, the
slowing NZ Home Sales data and some strong US results released during
Thursday and Fridayʼs sessions saw the pair plummet, breaking the 0.7208
support and dashing hopes of continued bullishness. Going forward, the
GDT Prices figure is due this week which will play its usual role in impacting
the NZD strongly.
Gold spent the week in decline as the appointment of a new UK Prime
Minister helped to stabilise the markets, as did the notable improvements in
the US economy which were reported in the US Beige Book. The
combination of growing stability in the UK and an improving US economy
now brings into question how long the metal can remain above the 1300.00
level. However, the commodityʼs movements will largely be technical in the
early stages of this week ahead of Thursdayʼs US results.
research@blackwellglobal.com

Mon 18th July 2016, 06:00 GMT
EURUSD
NEUTRAL
The Euro started the week on a positive note as the pair rose
steadily throughout the Eurogroup meetings and was additionally
buoyed by a weaker than expected US JOLTS Jobs figure of 5.50m.
In addition, the Eurozone CPI results were largely on target with
both the CPI and Core CPI coming in at 0.1% and 0.9%
respectively. However, Friday proved to be the pairs undoing as the
US Retail Sales figures shocked the market with a strong rise to
0.6% m/m (0.3% exp). Subsequently, the Euro fell sharply, amid a
swing towards the Dollar, and closed the week down around the
1.1024 mark.
Looking ahead, the week is likely to be a busy one for the pair given
that there is a slew of Eurozone and US economic data due out. In
particular, Thursday sees the ECBʼs Minimum Bid Rate decision and
requisite statements due. Although it is likely that the central bank
will keep the rate on hold at 0.00% there could be plenty of material
for markets to digest from the meeting. Last week saw the IMF point
to ongoing problems within the banking sector as posing a strong
threat to European growth. This was followed by some within the
banking sector calling for sharp bail outs, so donʼt be surprised if it is
a topic of discussion for the ECB.
From a technical perspective, the Euro remains within a
consolidative pattern as price action continues to meander
sideways. In addition, the RSI Oscillator remains neutral and largely
without a trend, whilst the moving averages continue to drift.
However, price action is now looking decidedly like a wedge which
could see a minor breakout in the week ahead. Regardless, our bias
remains neutral until a strong trend develops. Support is currently in
place for the pair at 1.0908, 1.0821, and 1.0708. Resistance exists
on the upside at 1.1182, 1.1343, and 1.1463.
21/07 11:45 EUR Minimum Bid Rate
21/07 12:30 USD Philly Fed Manufacturing Index
21/07 12:30 USD Unemployment Claims
1.1182 1.0908

Mon 18th July 2016, 06:00 GMT
GBPUSD
NEUTRAL
The Cable continued its disposition towards volatility throughout
the week as the pair initially rallied in response to news that
David Cameron was to be immediately replaced by Theresa
May as the UKʼs Prime Minister. In addition, the Bank of
England also provided a summer surprise as they held the
official bank rate steady despite plenty of analysis which
suggested cuts were on the way. Subsequently, the Cable was
buoyed following this decision, only to then be cut back by the
stronger than expected US Retail Sales data. Ultimately, the pair
still finished the week up around the 1.3170 mark.
The week ahead will be a busy one for the Cable as the pair
faces a bevy of fundamental data that is likely to be closely
monitored by the market. In particular, the UK Manufacturing
and Services PMIʼs are due out and are forecast to fall into
contraction at 48.5 and 48.7 respectively. In addition, keep a
close watch on the US Unemployment Claims figures given the
recent variability of those results.
From a technical perspective, the pair remains under the
auspices of a bearish trend despite the current sideways
consolidation, albeit one with a wide range. Currently, the RSI
Oscillator is trending higher away from overbought territory, but
any upward moves by price action are likely to be capped by
resistance at the 1.3532 mark. Subsequently, our bias remains
neutral this week but with the caveat that a resumption of the
medium term downtrend is likely in the coming month. Support is
currently in place for the pair at 1.2794. Resistance exists on the
upside at 1.3486.
21/07 12:30 USD Unemployment Claims
22/07 08:30 GBP Manufacturing PMI
22/07 08:30 GBP Services PMI
1.3486 1.2794

Mon 18th July 2016, 06:00 GMT
USDJPY
BEARISH
Last week proved highly positive for the pair as markets reacted
sharply to mounting speculation that the Abe government would
reintroduce some form of helicopter money. However, this is yet to
eventuate but certainly didnʼt stop the greenback from appreciating
strongly against the Yen, with some help from a resurgent US
Retail Sales result. In addition, the Japanese Final Industrial
Production figures also proved disappointing at -2.6%.
Subsequently, the USDJPY finished the week well up around the
104.72 mark.
The week ahead is fairly quiet on the Japanese fundamental
economic front with just the Manufacturing PMI and Machine Tool
Orders results due out. However, there are a slew of US releases
which are likely to impact the pair sharply with a focus on the US
Philly Fed Manufacturing Index. Subsequently, keep a close watch
on Thursdayʼs range of US economic data as it could provide
plenty of surprises.
From a technical perspective, the pair has managed to pullback
from just below the key 100.00 handle which has largely eased the
pressure on RSIʼs oversold status. In addition, the 12 EMA has
started trending strongly towards the 30 and 100 EMAʼs but price
action is likely to be capped by a cluster of resistance around the
106.78 mark. Subsequently, our bias remains bearish for the pair
given the level of strong resistance just above price actions current
position, which also coincides with the bearish trend line.
Therefore, it is likely that the downtrend will recommence
sometime in the latter part of the coming week. Support is
currently in place for the pair at 103.54, 99.95, and 98.98.
Resistance exists on the upside at 106.78, 110.16, and 111.86.
21/07 06:00 JPY Final Machine Tool Orders y/y
21/07 12:30 USD Philly Fed Manufacturing Index
21/07 12:30 USD Unemployment Claims
106.78 103.54

Mon 18th July 2016, 06:00 GMT
AUDUSD
BULLISH
The AUDUSD reacted strongly to last weekʼs poor US JOLTS Job
Openings and Australian NAB Business Confidence results. The
combined effect of the 5.50M and 6.0 postings in the respective
indicators caused the pair to challenge its pre-Brexit high seriously
throughout the week. However, the 0.7% and 0.2% upticks in the
US Core Retail Sales and Core CPI results proved to be too much
for the Aussie Dollar and sent it reeling in Fridayʼs session.
As for this week, the pair has both the Australian CB and MI
Leading indicators due out which could help it to stage a recovery.
Additionally, as Australiaʼs largest trading partner, Chinaʼs recently
reported 6.7% y/y GDP growth rate and 6.2% y/y uptick in
Industrial Production could be felt this week. However, the AUD
will ultimately be looking to the relatively US data-rich session on
Thursday for any major movements in the coming days.
On the technical front, the Aussie Dollar should have another
relatively bullish week so long as the pair doesnʼt dip below the
0.7556 support level. Staying above this level in the short term will
keep the pair within the confines of its bullish channel and could
see the AUD move above its pre-Brexit high. Such a move is
supported by the daily EMA activity which, at present, remains
highly bullish. In addition to this, the Parabolic SAR readings also
remain bullish for the Aussie which could keep buying pressure
high over the coming week. However, keep an eye on the RSI
oscillator as it is beginning to creep towards overbought territory.
Resistance is currently in place at 0.7639, 0.7678, and 0.7763.
Support is present at 0.7556, 0.7490, and 7437.
18/07 14:30 AUD CB Leading Index
20/07 00:30 AUD MI Leading Index
21/30 12:30 AUD Philadelphia Federal Manufacturing Index
0.7639 0.7556

Mon 18th July 2016, 06:00 GMT
NZDUSD
NEUTRAL
As last week opened, the Kiwi Dollar initially retreated from this
yearʼs high in what was a largely technical manoeuvre. However,
like many pairs, the NZD rallied in the subsequent session by
virtue of the weaker US JOLTS Job Openings figure which fell to
5.50M. Unfortunately, any hopes that this momentum would carry
through were quickly dashed on Thursday and Friday. The
resulting slip can generally be attributed to upticks in the US Retail
Sales and CPI data which drove the pair lower as the week came
to a close. This being said, the slowing rate of growth in NZ Home
Sales, which came in at 6%, exacerbated losses.
As we move on, the Global Dairy Trade Prices Index figure will be
at the forefront for the Kiwi Dollar once again. After last timeʼs
0.4% contraction, the pair will need a strong showing this time
around in order to help reverse some of last weekʼs losses. As for
the second half of the week, news is a little light on the NZ side of
things so the US Philadelphia Federal Manufacturing Index and
Unemployment Claims results will be key drivers of price as the
week comes to an end.
Looking at the technical data now, The NZDUSD is poised to have
a somewhat neutral week and range between the 0.7208 and
0.7099 levels. This comes as a result of not only a relatively flat
RSI reading, but also daily and H4 EMA activity. Whilst the daily
EMAʼs remain bullish, the H4 chartʼs moving averages are on the
verge of having a bearish crossover. Consequently, the pair could
struggle to find a bias in direction. Resistance exists at 0.7208,
0.7245, and 0.7324. Support can be found at 0.7099, 0.7049, and
0.6966. 19/07 14:27 NZD GDT Prices Index
21/07 12:30 USD Philadelphia Federal Manufacturing Index
21/07 12:30 USD Unemployment Claims
0.7208 0.7099

Mon 18th July 2016, 06:00 GMT
XAUUSD
NEUTRAL
Gold moved south in a relatively consistent fashion over the past
week, a symptom of the return of some political stability in the UK
and some improvements in the US economy. Specifically, Theresa
Mayʼs accession to the role of PM was well received by the
markets and saw the VIX and Gold continue to subside over the
subsequent sessions. Later in the week, the release of the US
Beige Book showed that most areas in the US were showing some
modest improvement, even if Inflation was not looking ready to
surge just yet.
Going ahead, the metal will largely be looking to Thursdayʼs US
Philadelphia Federal Manufacturing Index, Unemployment Claims,
and Existing New Home Sales figures for any price movements.
Weaker results in any of these indicators could help gold to remain
afloat throughout the week but could likewise send it tumbling if
they come in stronger than expected. However, keep an eye out
for any more shifts in sentiment that could arise from news
surrounding the ongoing Brexit saga.
Looking to the technical analysis, Goldʼs bullish trend looks to be
on hold as it moves into a ranging phase. On the daily chart, the
12 and 20 day EMAʼs are now moving into a sideways
configuration which could limit upside potential. In addition to this,
the combination of a bearish Daily Parabolic SAR reading and a
Bullish H4 Reading show a degree of indecisiveness for the metal.
Mirroring this sentiment, RSI is relatively flat which should see
gold oscillate between the 1300.00 and 1375.00 handles over the
coming week. Resistance is now at 1346.69, 1359.24, and
1375.96. Support will be evident at 1320.41, 1303.68, and
1280.98.
19/07 12:30 USD Building Permits
21/07 12:30 USD Unemployment Claims
21/07 12:30 USD Philadelphia Federal Manufacturing Index
1346.69 1320.41

Mon 18th July 2016, 06:00 GMT
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