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American Government Shuts Down

A guest post written by DAR Wong

Currency Market Observations – 01 May 2017

Fundamental Outlook

The U.S. prelim GDP grows below expectation while government shuts down for further approval on spending. Bank of Japan and European central Bank both hold steady in unchanged monetary policy. French election lifts the European stock market ahead of final vote on 7 May.

The U.S. Conference Board of consumer confidence expands at 120.3 in April after last month was revised at 124.9. New home sales rose 621,000 in March and first time above 600,000 in past 7 months.

The U.S. Crude inventories narrow down by 3.6 million barrels in reserve storage last week and above forecast. Durable goods order expanded at 0.7 percent in March and lowest record in past 3 months. Core data, excluding transport equipment, contracted 0.2 percent from a revised 0.5 percent gains in February.

Another report on weekly claims on American jobless benefits rose 257,000 for the week ended 22 April and highest in past 4 weeks’ average. Pending homes sales shrank 0.8 percent in March versus 5.5 percent growth in February.

The U.S. advanced GDP for Q1 grew 0.7 percent and below median forecast. The U.S government has shut down after the working week on Friday while waiting for spending bill to be approved by Trump government.

Japan’s all industries activity covering sales and services by businesses rose 0.7 percent in February. Housing spending shrank 1.3 percent in March from a year ago and behind expectation.

Core consumer prices in Tokyo city contracted 0.1 percent in April on annual basis but made best record in past 14 months. Unemployment rate remains steady at 2.8 percent.

Bank of Japan maintains the monetary policy steady but raises the forecast of GDP to 1.6 percent in fiscal year 2017-2018. On the other hand, policymakers tune down their expectation of consumer prices to 1.4 percent.

German ifo business climate reports at 112.9 in April against revised 112.4 in March, making best record in 6 years. German retail sales grew 0.1 percent in March and matched forecast after gaining at revised 1.1 percent in previous month.

The first round of French election has completed with Emmanuel Macron and Marine Le Pen advancing to the final Presidential runoff on 7 May. European stocks cheer in optimism and favor is leaning slightly toward Macron.

European Central Bank held its benchmark interest rate at zero percent on last Thursday as President Mario Draghi suggests downside risks to the bloc’s economy had diminished and its economic recovery picked up pace.

Prelim GDP for U.K. grew 0.3 percent in Q1 and matched forecast. Mortgage approvals for last month expanded 41,100 against revised 42,200 in February.

Technical Forecast

USD/JPY has climbed higher after short-covering with higher forecast from policymakers. This week, we forecast the trend will swing sideways from 110.50 – 112.50 region while poising to balance around EMA200 averaging line.

EUR/USD has been resisted at 1.0950 area with slowdown in ascension. This week, we foresee a correction will likely occur and prone to drive down at 1.0750 support. However, risk control is advised in case of breaking above 1.0950 level which may go higher for testing 1.1150 area.

GBP/USD has gradually built up strength while sitting on 1.2750 support. Closed at 1.2950 region on Friday, we believe the market has room to lift higher at 1.3150 this week, provided the aforementioned support is not violated. Short traders need control risk if the bulls step into the market.

Dar Wong

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

DAR Wong is a registered fund manager in Singapore with 26 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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