Weekly Market Review - 13th August 2012

Sales at U.S. retailers probably rose in July for the first time in four months as employment picked up, easing concern the expansion is faltering, economists said before reports this week. The projected 0.3 percent advance in purchases would follow a 0.5 percent drop in June, according to the median forecast of 65 economists surveyed by Bloomberg News ahead of the Commerce Department figures on Aug. 14. Other reports may show the cost of living increased and factory production climbed last month, according to an article published by Bloomberg news.

Bloomberg news reported that the German Chancellor Angela Merkel returns to the front line of the European debt crisis this week as the bloc’s leaders squabble over measures including bond purchases to relieve concerns the single currency may fragment. Merkel ends her summer vacation and travels to Canada Aug. 15-16 for talks with Prime Minister Stephen Harper as a spiraling euro crisis threatens to constrain the global economy. With the region’s leaders awaiting a German high court decision on bailout funding next month, they’re struggling to smooth divisions over a European Central Bank plan to buy the bonds of indebted nations.

U.K. inflation may have slowed in July to the least in 2 1/2 years, moving closer to the Bank of England’s target as weak demand helped contain price pressure. Consumer prices rose an annual 2.3 percent last month, compared with a reading of 2.4 percent in June, according to the median forecast of 35 economists surveyed by Bloomberg News. The Bank of England cut its gross-domestic-product forecast this week and sees inflation easing to below its 2 percent goal next year, indicating there may be a need for more stimulus. Still, wheat, corn and oil prices have risen in the past month, which may slow the pace of price declines.

EUR/USD: The EUR/USD started the week on positive ground, trading at 1.22908 at the time of writing on market corrections after dipping to a low of 1.22600 following poor Japanese GDP data early today. Market sentiments remain fragile on the EUR on increasing signs that the Europe’s debt crisis is weighing on economies across the globe, boosting demand for the relative safety of the U.S. currency. Reports tomorrow forecast to show gross domestic product grew at a slower pace in Germany and contracted in France. Other events likely to after the trend of the EUR/USD this week are: Tuesday, data on industrial production as well as data on second quarter gross domestic product in the Eurozone, while Germany and France are also to release individual GDP reports. In addition, the ZEW Centre for Economic Research will release reports on economic sentiment in Germany and throughout the single currency bloc. On the other hand, the U.S. will publish data on retail sales and producer price inflation, followed by data on business inventories. Wednesday, the U.S. will release official data on consumer price inflation, as well as a report on manufacturing activity in the New York area and government data on net long term securities transactions. The Federal Reserve will also produce data on the capacity utilization rate and industrial production, followed by a government report on crude oil inventories. Thursday, data on consumer price inflation in the Eurozone, while the U.S will publish official data on building permits, as well as weekly data on unemployment claims. U.S will also release official data on housing starts and a report on manufacturing activity in the Philadelphia area. Friday, the ECB will release data on the current account in the Eurozone, while Germany will publish official data on producer price inflation. The U.S will release a report by the University of Michigan on consumer sentiment and inflation expectations. The resistance level is at 1.24501 and the support level is at 1.21592 on the weekly chart below.

USD/JPY: The USD/JPY started the week in the red after the Bank of Japan held off fresh easing measures at its policy meeting on Thursday and after data showed China’s export growth collapsed, fueling speculation the global economy is slowing, pushing investors to search for refuge. Earlier today, a report showed that the Japanese economy grew at a weaker-than-expected and the news pressed the pair slightly up. However, trading remains sticky in the range of 78.261 and 78.294. Events in Japan likely to affect the USD/JPY this week are: Tuesday, the BoJ will produce the minutes of its most recent policy-setting meeting and Japan will also release government data on tertiary industry activity. Investors will closely monitor the BoJ minutes for signs that the central bank is orienting towards further monetary easing. Latest developments and economic data in the Eurozone and the U.S will have an impact on the movements of the USD/JPY. The resistance level is at 78.844 and the support level is at 77.870 on the weekly chart.

Gold: The yellow metal was trading at 1621.82 at the time of writing on mounting speculation that central banks will have to do more to bolster economic growth. China’s industrial-production growth weakened in July and U.S. and European manufacturing contracted. The Federal Reserve pledged to do more if needed on Aug. 1 and the European Central Bank promised last month to do “whatever it takes” to preserve the euro, boosting the demand for gold. Sentiments remain bullish on gold given the ongoing speculation that the Federal Reserve will introduce fresh easing measures to boost U.S. economic growth. Investors will be watching U.S. data on retail sales, inflation and housing during the upcoming week in an attempt to assess the strength of the U.S. economic recovery. Investors will also be monitoring the latest developments and economic data in the Eurozone and china to get more visibility on the commodity. The resistance level is at 1640.76 and the support level is at 1582.26 on the weekly chart.

Oil (WTI): The price of oil was slightly lower this morning in Asia at 93.190 at the time of writing on market correction and as ongoing concerns over the health of the global economy and its impact on future oil demand prospects weighed on energy prices. Renewed fears over escalating violence in Syria and lingering tensions between Iran and the West have also been supporting prices in recent weeks. Oil remains supported as ongoing expectations that central banks around the world would soon announce additional stimulus measures to help spur weak global growth. Moreover, a report that may show signs of economic improvement in the U.S., the world’s biggest crude consumer. This week, investors will be awaiting data on second quarter growth from the euro zone and looking ahead to central bank minutes from the Bank of Japan and the BoE, for signs of further monetary easing to boost their respective economies. Economic data and latest developments in the U.S and China will affect the trend of the commodity. Investors will watch U.S. data on retail sales, inflation and housing in an attempt to assess the strength of the U.S. economic recovery. The resistance level is at 94.633 and the support level is at 90.528 on the weekly chart.

Good Luck in trading…