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America Adds More Jobs in Non-Farm Payrolls

A guest post written by DAR Wong

Currency Market Observations – 12 January 2015

Fundamental Outlook

The US adds more jobs into monthly payrolls with narrowing trade deficit. Policymakers reiterate on low interest rates to maintain recovery rate. German slows down in economic momentum while initiate estimate for inflation in Eurozone will decline. Bank of England remains keeps interest rate unchanged to ensure economic recovery.

The US Institute of Supply Management states the service index for December fell to 56.2 against the previous month 59.3, causing worries for retail demand amid recovery. Trade deficit narrowed to USD39 billion in December versus revised USD42.2 billion deficits in prior month.

The US FOMC meeting minutes release emphasized on maintaining low rates to support recovery in economy. FED chair Yellen foresees no rate rates before mid year to keep the growth in steady rate. Another report on initial jobless claims for the week ended 3 January stayed at 294,000 and in line with median forecast.

American non-farm payroll added 252,000 jobs in December followed a 353,000 rise in prior month that was more than previously estimated. Jobless rate dropped to 5.6 percent, the lowest level since June 2008.

German prelim measure for consumer prices reports at par growth in January and unchanged from prior month, underscoring weak growth in largest euro economy. German industrial production contracted 0.1 percent in November after it gained at revised 0.6 percent in October. Trade balance grew smaller pace at EUR17.7 billion after it was reported at EUR20.6 billion in October.

Among the 18 nations in Euro bloc, the final service index reported by Markit stagnated at 51.6 in December and reflects slowdown. The Eurostat reports the flash estimate for consumer prices in January will contract 0.2 percent from a year ago and below 0.3 percent growth in December. However, flash estimate for core consumer prices may gain 0.8 percent on annual basis and better than expected. In the Eurozone, unemployment rate remains at 11.5 percent in December.

UK Markit says the construction index fell to 57.6 in December versus 59.4 in prior month, indicating weak demand from retail markets. Another data on service index slid to 55.8, below forecast and lower than 58.6 reading in November.

Bank of England maintains the overnight lending rate at 0.5 percent unchanged in central bank meeting. Policymakers keep the asset purchase program unchanged at GBP375 billion to check the recovery in UK economy.

UK manufacturing production expanded 0.7 percent in November and above mean forecast. Trade deficit narrowed to GBP8.8 billion after the previous month deficit was revised at GBP9.8 billion.

Crude oil dropped to the lowest level in more than 5 years on growing evidence that OPEC won’t pare output to reduce a global supply surplus. Investors remain wary that plunging crude prices in coming months might drag down equity prices.

Technical Forecast

USD/JPY has been threading from 118.00 – 120.00 regions while in technical consolidation. The market is prone to remain in mixed sentiment for few more weeks before new fundamental leads the trend. Technically speaking, the bears may break below 118.00 supports and attempt 116.00 as next target for profit-taking.

EUR/USD has reached almost 9-1/2 year low at 1.1754 last week. This week, it will be very crucial to see if the market can trade in recovery from 1.1800 – 1.2000 ranges should short-covering appears. However, breaking below 1.1750 supports might lead to a lower bottom at 1.1650 levels before bargain-hunting comes in.

GBP/USD took a dip below 1.5000 benchmarks before it closed at 1.5146 on Friday. This week, we reckon the trend may make technical recovery from 1.5000 – 1.5300 regions if Dollar begins to weaken in correction. However, beware of piercing below 1.5000 levels as this might lead to 1.4850 targets very quickly without forewarning.

Dar Wong

This post is contributed by OPF Guest Blogger, DAR Wong.

DAR Wong is an approved fund manager in Singapore with 25 years of global trading experiences. You may reach him at dar@pwforex.com

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DISCLAIMER: This post is written for general information only. The author, publisher and/or any third party involved in the distribution of this work assume no legal responsibilities and shall have no liability whatsoever for any direct or consequential losses, costs or expenses arising from the use of the information contained herein.

 






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