Weekly Recap: EUR stood resilient to Greece, Broad USD weakness persisted

Last week saw the US dollar extending its losing streak for the second straight week versus its major competitors following the recent series of tepid US fundamentals including the latest US durable goods orders data released on Friday. With the Fed’s policy meeting due this Wednesday, markets eased earlier rate-hike bets against the backdrop of US economy losing steam.

Further, Greece debt reforms talks also remained the major focus in the past week with little progress achieved in its April 24 Euro group meeting and talks likely to resume may be before May 11 deadline.

Keeping in mind the two major factors to rule the week ended April 24, we published two macro ideas during the said period – first under JPY Forecast and the second report under Gold Price Analysis, both ideas played out well.

The first macro report titled â€œEUR/JPY Forecast: eyes 126 – key support by Friday”was published on April 21. The expected target of 126 levels for EUR/JPY was not achieved as the idea did not work out well. As per our analysis and projections, it was expected that the looming Greece crisis with increasing nation’s default risk and hence a Grexit may pressurize the shared currency across the board. However, the idea failed as the euro stood resilient versus the US dollar, hovering around 1.08 for the rest of the week and even posted fresh two week highs at 1.0901 levels on Friday despite no deal was reached on Greece at the Euro group meeting.

In short, as expected the euro did not react negatively to the impending Greece reforms talks and instead broke to the upside. Hence, this translated in to the EUR/JPY cross also reaching fresh 2-week highs above 130 handle.

However, as expected JPY did stick to its range between 120.50 and 118.50. But, the major driver for the pair remained the US dollar moves. The weakness in the greenback led the cross higher and closed the week higher at 129.38 levels.

The second report titled â€œGold Forecast: USD 1212 –1190 Range game to extend” was published on April 22. The idea did work in the broader sense that, the yellow metal managed to keep its monthly range locked between USD 1220 -1180 band. Although, gold breached the 1180 range on Friday, it did close near the 1180 support.

Moreover, on Friday, the main driver for major sell-off triggered in gold prices was the rallying US stocks on upbeat corporate earnings results which sent NASDAQ to fresh all-time highs. The yellow metal totally ignored the US dollar weakness after the US durable goods orders data missed estimates and fell to fresh monthly lows at 1174.10 levels tracking higher US equities, which boosted appetite for riskier assets dulling the demand for gold as a safe-haven. While inconclusive Greece reforms talks also failed to support gold prices.

Week Ahead:

The central bankers are expected to drive this week, with the Fed set to announce its policy statement on Wednesday, followed by RBNZ’s rate statement on Thursday and finally BOJ monetary policy statement to close the week on Friday. Also, markets may closely watch preliminary data on first quarter US growth figures for further indications on the strength of the economy.