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American Non-Farm Payroll Slows Down

A guest post written by DAR Wong

Currency Market Observations – 7 September 2015

Fundamental Outlook

The U.S. nonfarm payroll grows at slower pace while jobless claims increase. Japan faces stagnation in growth as investors expect more stimulus to follow through. European Central Bank holds the refinance rate steady amid low borrowing cost. Construction and housing are expected to regain recovery in U.K. economy.

The U.S. Institute of Supply Management reports the manufacturing index expanded at 51.1 in August but still below forecast. Reading above 50.0 still indicates an expansion of economy growth. Construction spending in July grew 0.7 percent compared to revised 0.7 percent in previous month.

The U.S. weekly claims for jobless benefits rose to 282,000 in the week ended 29 August, from revised 280,000 from previous week. Trade deficits narrowed in July to USD41.9 billion, smallest in past 5 months, compared to ballooning USD45.8 billion in June.

The Institute of Supply Management reports the service index for August grew 59.0 and remained strong as it floats above 50.0 benchmarks. On Friday, American nonfarm payroll rose 173,000 and much below revised 245,000 in July. However, unemployment dropped to 5.1 percent in August and better than forecast.

In Japan, final manufacturing index rose 51.7 in August and remained consistent with forecast. Capital spending in Q2 invested by large companies expanded at 5.6 percent and way below expectation. Another data on housing starts grew 7.4 percent in July on year basis but below median forecast.

German retail sales rose 1.4 percent in July and better than 1.0 gains in June. Another report on core consumer prices flash estimate in August rose 1.0 percent and remained same as previous month.

German final manufacturing index rose 53.3 in August and same as forecast. Unemployment in Eurozone dropped to 10.9 in July from prior month 11.1 percent. Another separate report by Markit says final service index in Euro 19 nations stayed consistent with growth at 54.4 in August.

European Central Bank remained the refinance rate at 0.05 percent on Thursday and refrained from additional stimulus. Central Bank President Draghi stresses that policymakers are ready to act if necessary. Interest rate will stay at low sides to aid recovery.

Markit reports UK manufacturing index grew 51.5 in August and declined from 51.9 in July. Another report on mortgage approvals climbed to 69,000 in July after it showed 67,000 in June.

U.K. construction index stayed strong at 57.3 in August and slight higher than previous month. Housing demand is expected to recover in British economy. The service index in U.K. expanded at 55.6 in August and slight lower than prior month 57.4.

Technical Forecast

USD/JPY revisited the 119.00 supports on Friday closing. This week, we foresee strong buying interest will arise from 118.50 areas and push the trend back into 120.00 levels. Technically, we still see some sideways trend from 118.50 – 121.50 ranges in mixed sentiments.

EUR/USD has been weakening after ECB Draghi reassures of low interest rates to aid recovery. Market edges down gradually to 1.1136 for weekend closing from 1.1250 regions after his remarks. This week, we reckon the trend will decline further to 1.0970 – 1.1000 bottoms to complete the south journey. Immediate resistance lays at 1.1250 levels in case of unexpected recovery.

GBP/USD has reached the first support at 1.5164 as it closed on Friday. We expect some buying interest will emerge as bargain hunting will rise from 1.5080 regions this week. We predict the technical resistance will emerge at 1.5330 areas if market recovers.

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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