Weekly Outlook: 2014, November 23 - 30

USD/CAD forecast for the week of November 24, 2014, Technical Analysis

The USD/CAD pair tried to rally initially during the week, but then found enough resistance of the 1.13 level to turn things back around and form a little bit of a shooting star. The shooting star of course suggests that the market wants to go little bit lower, but quite frankly there is a bit of support below so we are not comfortable shorting this market. At this point time, we are looking for the market to continue pulling back slightly, and then buying supportive candles as they appear.



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NZD/USD forecast for the week of November 24, 2014, Technical Analysis

The NZD/USD pair initially fell during the course of the week, but found enough support to bounce and form a little bit of a hammer. That hammer of course suggests that the market could bounce a little bit from here but we recognize that the 0.80 level above is resistive, and that the trend is most certainly to the downside. We are simply waiting on a resistant candle in order to continue selling this market which should go much lower based upon week commodity prices and a central bank in New Zealand that is trying to bring down the value of the currency.



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GBP/USD forecast for the week of November 24, 2014, Technical Analysis

The GBP/USD pair fell initially during the course of the week, but as you can see found a little bit of support below in order to form a stubby little hammer. We believe that a bounce could be coming, but quite frankly there’s so much resistance above that we think this bounce will end up being a nice selling opportunity in a market that is most certainly negative. We like selling the British pound, and we believe that the US dollar will continue to be the strongest currency in the Forex world.




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EUR/USD forecast for the week of November 24, 2014, Technical Analysis

The EUR/USD pair initially tried to rally during the week, but as you can see the area above the 1.25 level continues to be far too expensive, and as a result it appears that the market is ready to continue going lower. With that, we feel that a break down below the lows again would send this market much lower and that would be a nice selling opportunity. We believe that the market will then go down to the 1.2050 level, and then perhaps even lower than that. We still maintain that rallies are selling opportunities.




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The U.S. dollar fell to three-week lows against the Canadian dollar on Friday following the release of stronger-than-forecast Canadian inflation data, while an unexpected rate cut by China’s central bank and higher oil prices also boosted the commodity exposed Canadian dollar.

USD/CAD fell to lows of 1.1191, before pulling back to 1.1231 in late trade, off 0.63% for the day.

The Canadian dollar was boosted after Statistics Canada reported that the annual rate of inflation rose to a one year high of 2.4% in October, up from 2.0% in September and compared to expectations for an unchanged reading.

The robust data was seen as increasing the likelihood that the Bank of Canada would have to adjust expectations while making monetary policy decisions.

The loonie, as the Canadian dollar is also known, received an additional boost after China’s central bank unexpectedly cut interest rates for the first time in more than two years on Friday.

The move came in response to recent signs of a slowdown in the world’s second-largest economy.

Oil prices moved higher following China’s rate cut, which fuelled hopes for increased demand for raw materials, including oil.

Oil prices also found support amid growing expectations that the Organization of the Petroleum Exporting Countries may decide to curb production at its upcoming meeting next week.

Oil prices have been falling since June pressured lower by concerns that global production will outstrip demand.

In the week ahead, the U.S. is to release a string of economic reports on Wednesday ahead of Thursday’s Thanksgiving holiday, including a look at unemployment claims and durable goods orders. Tuesday’s report on Canadian retail sales and Friday’s data on economic growth will also be in focus.

Tuesday, November 25

• Canada is to release data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.
• The U.S. is to release revised data on third quarter gross domestic product and a report on consumer confidence.

Wednesday, November 26

• The U.S. is to release a flurry of data ahead of Thursday’s holiday, including reports on durable goods orders, unemployment claims, personal income and spending, as well as reports on new and pending home sales and revised data on consumer sentiment.

Thursday, November 27

• Markets in the U.S. are to remain closed for the Thanksgiving Holiday.
• Canada is to publish data on the current account.

Friday, November 28

• Canada is to round up the week with its monthly GDP report.

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Gold prices rallied to a three-week high on Friday, after China’s central bank unexpectedly cut interest rates for the first time in more than two years.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery rose to a session high of $1,207.60 a troy ounce, the most since October 30, before settling at $1,197.70 by close of trade, up $6.80, or 0.57%.

On the week, gold prices rose $12.10, or 1.01%, the second consecutive weekly gain.

Futures were likely to find support at $1,173.90, the low from November 19, and resistance at $1,216.50, the high from October 30.

Gold prices rose on news that the People's Bank of China cut its benchmark one-year deposit rate by 25 basis points to 2.75% and trimmed its one-year lending rate by 40 basis points to 5.6%.

The move came in response to recent signs of a slowdown in the world’s second-largest economy.

Gold can benefit from such an environment of easy money because of expectations that ample liquidity would put a damper on the value of paper currencies.

Meanwhile, European Central Bank President Mario Draghi reiterated on Friday that the central bank is ready to expand its stimulus program to raise inflation and inflation expectations as quickly as possible.

Draghi also warned about weak growth in the euro zone, saying that no improvements are expected in the coming months.

The ECB's current stimulus program includes purchases of asset-backed securities and covered bonds, though markets are keeping a close eye out for plans to announce purchases of government debt, a stimulus tool known as quantitative easing.

Expectations of monetary stimulus tend to benefit gold, as the metal is seen as a safe store of value and inflation hedge.

Despite Friday's upbeat performance, gold prices are likely to remain vulnerable in the near-term amid indications a strengthening U.S. economic recovery will force the Federal Reserve to start raising interest rates sooner and faster than previously thought.

In the week ahead, the U.S. is to release a string of economic reports on Wednesday due to Thursday’s Thanksgiving holiday, including a look at unemployment claims and durable goods orders.

Data from the Commodities Futures Trading Commission released Friday showed that hedge funds and money managers significantly increased their bullish bets in gold futures in the week ending November 18.

Net longs totaled 60,307 contracts, up 35.7% from net longs of 38,763 in the preceding week.

Also on the Comex, silver futures for December delivery climbed 25.8 cents, or 1.6%, on Friday to settle the week at $16.39 a troy ounce by close of trade.

Prices hit a daily peak of $16.60 an ounce earlier Friday, the highest level since October 30.

The December silver futures contract tacked on 8.0 cents, or 0.48%, on the week, the second straight weekly advance.

According to the CFTC, net silver longs totaled 745 contracts as of last week, compared to net shorts of 1,983 contracts in the preceding week.

Elsewhere in metals trading, copper for December delivery inched up 1.2 cents, or 0.4%, on Friday to settle at $3.031 a pound by a close of trade.

Prices rallied to a session high of $3.077 earlier in the day, before paring gains towards the end of the session, as traders weighed whether a surprise rate cut in China would translate into an increase in demand for the industrial metal.

The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.

Despite Friday's gains, Comex copper prices shed 1.5 cents, or 0.49%, on the week, amid ongoing concerns over the health of the global economy.

Copper is sensitive to the economic growth outlook because of its widespread uses across industries.

According to the CFTC, net copper shorts totaled 1,304 contracts as of last week, compared to net shorts of 1,664 contracts in the preceding week.

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The euro was sharply lower against the dollar on Friday after comments by European Central Bank President Mario Draghi indicated that it is moving closer to implementing quantitative easing measures to shore up the euro area economy.

EUR/USD was down 1.19% to two-week lows of 1.2391 late Friday and ended the week with losses of 1.04%.

The drop in the euro came after Draghi warned that inflation expectations were declining to levels that were very low and said the ECB is ready to expand its stimulus program to raise inflation and inflation expectations as quickly as possible

“We will continue to meet our responsibility, we will do what we must to raise inflation and inflation expectations as fast as possible, as our price stability mandate requires of us," Draghi said.

“If on its current trajectory our policy is not effective enough to achieve this, or further risks to the inflation outlook materialize, we would step up the pressure and broaden even more the channels through which we intervene, by altering accordingly the size, pace and composition of our purchases,” he added.

The annual rate on inflation in the euro area was 0.4% in October, well below the ECB’s target of close to but just under 2%.

The single currency also weakened against the yen and the pound, with EUR/JPY down 1.52% to 145.97 and EUR/GBP falling 0.98% to 0.7912 in late trade.

Draghi’s warning came as China’s central bank unexpectedly cut interest rates for the first time in more than two years on Friday. The move came in response to recent signs of a slowdown in the world’s second-largest economy.

Demand for the dollar continued to remain underpinned after the minutes of the Federal Reserve’s latest meeting indicated that officials believe the economic recovery is strong enough to withstand external threats to growth.

However, the minutes offered little additional clarity about when rates could start to rise. Markets are currently expecting the U.S. central bank to start raising rates sometime around September 2015.

In the week ahead, investors will be looking ahead to Friday’s preliminary report on euro zone inflation. The U.S. is to release a string of economic reports on Wednesday ahead of Thursday’s Thanksgiving holiday, including reports on unemployment claims and durable goods orders.

Monday, November 24

• The Ifo Institute is to release its report on German business climate.

Tuesday, November 25

• The U.S. is to release revised data on third quarter gross domestic product and a report on consumer confidence.

Wednesday, November 26

• The U.S. is to release a flurry of data ahead of Thursday’s holiday, including reports on durable goods orders, unemployment claims, personal income and spending, as well as reports on new and pending home sales and revised data on consumer sentiment.

Thursday, November 27

• In the euro zone, Germany and Spain are to release preliminary data on consumer price inflation. Germany is also to produce data on employment change and consumer climate.
• Markets in the U.S. are to remain closed for the Thanksgiving Holiday.

Friday, November 28

• The euro zone is to release what will be closely watched preliminary data on the consumer price index as well as a report on the unemployment rate, while Germany is to release data on retail sales.

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