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American Payroll Gives Better Outlook

A guest post written by DAR Wong

Currency Market Observations – 7 April 2014

Fundamental Outlook

The US trade deficits widens while jobless claims also rise. However, monthly US payroll shows gains in new jobs and triggers stimulus ease. Japan begins higher sales tax in April amid market expectation of slowdown in Q2. European Central Bank (ECB) remains interest rate unchanged even after Euro inflation recedes.

The US Institute for Supply Management’s manufacturing index increased to 53.7 in March from prior month 53.2. On back to back, the non-manufacturing index from same institution rose to 53.1 from 51.6 in February. Another report on trade deficit widened in February by 7.7 percent to USD42.3 billion, the biggest since September, from the prior month’s USD39.3 billion.

American weekly jobless claims rose 16,000 to 326,000 in the period ended March 29 vs. prior week 310,000. Before the weekend, non-farm payroll rose 192,000 in the month of March after gaining 197,000 revised figures in prior month. Jobless rate held unchanged at 6.7 percent.

The US FED chairperson Janet Yellen eases investors’ concern that the world’s biggest economy will need stimulus to guide economic recovery, hence downplays worries on interest rate rise. However, the Dollar climbed to a 5-week high against the euro on Friday as payroll strengthened, backing the case for reducing monetary stimulus.

HSBC reported China’s manufacturing Index fell to 48 in March, the lowest reading since July, from 48.5 in February. A separate PMI from the government, with a larger sample size, was at 50.3 from 50.2 in previous month. Market investors are still monitoring the China’s manufacturing data as one major source of market data to bet on more investments.

Japan’s quarterly Tankan report on manufacturing index was at 17 in March, climbing from 16 in December and highest since 2007. The second report on large non-manufacturers rose to 24 from 20 in December, in line with projections. Market analysts expect the second quarter to be weak as Japan has begun the rise in sales tax from 1 April.

Euro areas inflation slowed in March to the lowest level in over 4 years. Consumer prices rose 0.5 percent at annualized rate, after gained 0.7 percent in February. Last week, European Central Bank (ECB) kept interest rates unchanged. Main refinancing rate was maintained at 0.25 percent, deposit rate at zero and lending rate at 0.75 percent.

UK manufacturing index was reported at 55.3 in March and down from prior month 56.2. Another services index also unexpectedly slowed down to 57.6 from 58.2 in February, reported by Markit Economics.

Nationwide Building Society says UK housing prices rose for a 15th month in March when London property average values home gained 0.4 percent from February to GBP180,264 (USD300,000).

Technical Forecast

USD/JPY topped 104.13 last week and closed at 103.23 for the weekend. The market is slid after US non-farm payroll as traders hedged into Yen again. This week, we foresee the trend will continue to fall and probably aim at 101.50 regions due to profit liquidation. Resistance remains at 104.00 regions unless the bulls pierce above 104.70 for another up run.

EUR/USD closed at 1.3702 on Friday as Euro has been falling after mid last week. The market is prone to decline further in coming week as fear of US stimulus may withdraw faster than expected. Technically, we reckon the range will trade from 1.3600 – 1.3800 levels while picking sell strategy could be ideal on pull up retracement. Abandon your short-view if the market violates above 1.3800 resistances.

GBP/USD has turned down from 1.6684 and moved into bearish sentiment. This week, we predict strong resistance will set up at 1.6600 levels that might drive the bears lower at 1.6450 regions. The technical day-chart has formed the head-cum-shoulder pattern that suggests the right shoulder could be going lower soon. Abandon you short-view temporary if the market penetrates above 1.6700 resistances.

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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