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America Adds Payroll to Maintain Growth

A guest post written by DAR Wong

Currency Market Observations – 09 February 2015

Fundamental Outlook

The US trade deficit increases probably due to more imports. Payroll gains continue to stay healthy but unable to spur rate hike for fighting inflation. UK performs better improvement in recovery but does not qualify for rate tightening due to global slowdown. Reserve Bank of Australia adds into the league of cutting interest rate that may spur more similar actions in coming months.

The US Institute for Supply Management (ISM) releases its index of manufacturing activity fell to 53.5 in January from previous month 55.1. However, the other service index rose to 56.7 from 56.2 in December.

Consumer spending among Americans slid 0.3 percent after a downwardly revised 0.5 percent increase in November. It was the largest drop since September 2009. Crude oil inventories for the week ended 31 January remained at high level about 6.3 million barrels.

The US Commerce Department says trade deficit jumped 17.1 percent to USD46.6 billion in December, highest in past 2 years. Jobless claims increased 11,000 to a seasonally adjusted 278,000 for the week ended 31 January.

American payrolls added 257,000 jobs in January after 329,000 job gains in previous month. Jobless rate for the same month was 5.7 percent. Data for January shows no indication of rates hike.

According to a new study by McKinsey, the world ended last year with some USD57 trillion deeper in debt than it was in 2007. The debt is twice the amount of the total GDP produced by the world economy.

Eurostat says the retail sales for 19 nations rose 0.3 percent in December and above the median forecast, underscoring the spending power increasing during festive seasons.

UK Markit reports the manufacturing PMI gained 53.0 and above median forecast after rising at revised 52.7 in December. Service index performed at 57.2 in January and better than 55.8 in previous month, after the manufacturing index climbed.

British construction index advanced to 59.1 in January after it rose to 57.6 in December. Trade deficit widened to GBP10.2 billion in December after the prior month was revised to GBP9.3 billion.

UK central bank’s 9-member Monetary Policy Committee (MPC) have maintained main interest rate at a record low of 0.5 percent and bond purchase program stays at GDP375 billion (USD571 billion). Low inflation pushes back expectations of an interest rate rise, with a hike in 2015 now looking less likely.

Technical Forecast

USD/JPY spiked on Friday before weekend and closed at 119.09. The market has broken above 118.60 levels and is expected to climb higher in coming week. Technically, we foresee the support will sit at 118.50 regions while the bulls have potential to rise to 120.50 levels in near future.

EUR/USD mainly traded from 1.1300 – 1.1460 regions last week in tight range. There is no clue of trend direction in the market now as many uncertainties arise from Crude and USD sentiment. This week, we reckon the violation above 1.1460 might reach up to 1.1650 regions while breaking below 1.1300 will extend downwards at 1.1120 areas.

GBP/USD pulled up to 1.5350 regions last week. We expect the bulls to consolidate in the range 1.5100 – 1.5350 for coming week. The market is rather uncertain due to many external influences though we foresee sideways weakness will be more likely to occur. Break above 1.5350 resistances needs to abandon your short-view.

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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