Daily Market Reviews

Economic Calendar for February 16, 2017

Time (GMT) Currency Event Previous Forecast
00:30 AUD Employment Change 13.5K 9.7K
00:30 AUD Unemployment Rate 5.8% 5.8%
12:30 EUR ECB Monetary Policy Meeting Accounts
13:30 USD Building Permits 1.21M 1.23M
13:30 USD Philly Fed Manufacturing Index 23.6 18.5
13:30 USD Unemployment Claims 234K 243K
13:30 USD Housing Starts 1.23M 1.23M


Global Market Overview

The Euro finished mixed on Wednesday as it began to recover from recent weakness following poor GDP results from across the Eurozone.  The Pound was broadly weaker, extending losses that have come about after weaker than expected inflation data from the U.K.  The USD was broadly weaker for the day, dropping late in the North American session despite indications from several Federal Reserve officials that interest rates would rise in march and then at least twice more in 2017.  The Yen was mostly stronger for the day, even though global risk appetite remained high among investors and traders.  Gold reversed early losses and finished the day higher as the U.S. dollar index fell late in the session.  Crude posted a small loss following U.S. data showing a sixth consecutive rise in crude inventory levels.

Daily Currency Pair Analysis

EUR/USD – After falling early in the session, reaching down towards the 1.0500 level, the pair bounced later in the day as the U.S. dollar weakened broadly.  By the close the pair was higher for the day, but remained just below the 1.0600 resistance level, and yet above the 1.0550 resistance level, which some might argue is a stronger technical level and could provide support for the pair moving forward.  That said, there have been several Federal Reserve members who have called for a March interest rate hike in the U.S., and there are good indications that rates will rise at least three times this year.  That should strengthen the U.S. dollar considerably and would certainly send this pair sharply lower as conditions remain loose for monetary policy in Europe.

USD/JPY – The pair gained early in the session hitting a high just a few pips below the 115.00 level before retreating.  The increasing weakness of the U.S. dollar during the North American session sent the pair below its opening level, but it did find support as it reached the 114.00 level and bounced from there.  With the increasing probability for rising interest rates in the U.S. next month this pair should get a boost, but there is a chance that traders, especially in Japan, will remain cautious and keep the pair range-bound until they see if the Fed will actually move to raise rates.  Once we do get an interest rate hike we expect the pair to head higher and test the resistance at the 118.00 level, but we may have to wait until late March for the pair to trade up to that level.

USD/CAD – With crude remaining choppy on Wednesday the pair had no choice but to follow the U.S. dollar, which it did.  The pair rose early in the day, topping the 1.3100 level, but then fell during the North American session as the U.S. dollar weakened broadly.  This took the pair back below the 1.3100 level and back below its opening level, though the loss for the day was a very modest less than 10 pips.  The pair remains pretty much directionless at this point, and with crude remaining range-bound it won’t take a cue from that direction.  It could begin to rise on thoughts of increased interest rates in the U.S., but traders seem hesitant to believe the signs from the Fed that rates will rise next month.

GBP/USD – The pair fell early in the session, trading briefly below the 1.2400 handle before finding support and bouncing.  The weakness of the U.S. dollar late in the day gave the pair an additional boost higher, but it wasn’t able to make it back to the 1.2500 level as it hit resistance at the 1.2450 level that had been supportive so often over the past couple of weeks.  The pair should be falling on a fundamental basis as inflation was reported as weak in the U.K. earlier this week, and the U.S. central bankers have been telegraphing a hike in interest rates next month, but so far the pair remains fairly resilient.  Eventually we think it will have to fall however, with the 1.2200 level as the first line of support.


Commodity Update

Gold – Gold ended a choppy trading session higher on Wednesday, snapping a four session losing streak as it bounced off a two week low during the North American session in response to a falling U.S. dollar index.  It was a bit surprising to see the gains for gold as equity markets remained in rally mode, with risk appetite continuing to be healthy.  Markets were also treated to statements from the Philadelphia Fed president, who said a rate hike in March is appropriate, and the Boston Fed president, who said we may see more than three rate hikes in 2017.  Technically gold remains in a two month uptrend, indicating we could continue to see gains for the yellow metal.

Oil – Crude had a choppy trading session on Wednesday, finally settling with a modest loss as traders were put off by the sixth consecutive weekly rise in crude inventory levels.  The U.S. Energy Information Agency reported a 9.5 million barrel rise in crude stocks, which was three times more than was expected by markets, yet crude declined by just $0.09 a barrel, holding above the $53 a barrel level once again.  Given the strong production in the U.S. and the rising crude stocks it seems crude should be trading lower, but traders continue to hope for rising demand to sap the increased supplies and have also been somewhat calmed by the falling OPEC production of crude.