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American Payroll Grows and Lifts Dow

A guest post written by DAR Wong

Currency Market Observations – 06 February 2017

Fundamental Outlook

The U.S. increases in payroll and lifts Dow’s closing above 20,000 level. Federal Reserve and central banks in Japan and U.K. stays unchanged in monetary policy. China grows in manufacturing.

The U.S. pending homes sales were up 1.6 percent in December from a year ago, despite the interest moved up in mortgage loans. Personal spending rose 0.5 percent after gaining 0.2 percent in November.

The U.S. Conference Board of consumer confidence expands to 111.8 in January, falling off 113.3 revised in last month. Another report on manufacturing index hit 56 in January, an increase of 1.5 percentage points from December. Reading above 50 benchmark signals expansion and growing for 92nd consecutive month.

Construction spending for December contracted 0.2 percent and down from 0.9 percent growth in previous month. FED chair Yellen and her policymakers remains unchanged in monetary policy. Yellen sees improved sentiment but no rate hike is necessary at the moment.

The U.S. jobless claims for the week ended 28 January reduced to 246,000 and lower than consensus. Monthly release on non-farm payroll rose 227,000 in January and better than expectation. Unemployment rate increased little bit to 4.8 percent in the same month. Dow Jones benchmark closed at its best record above 20,000 since the new year started.

China’s manufacturing index rises to 51.3 and above 50.0 benchmark for fourth consecutive month, pointing to stable growth. China’s Caixin manufacturing index grew 51.0 in January and below forecast. Reading above 50.0 still signals expansion.

Japan’s retail sales rose 0.6 percent in December from a year ago, sliding off consensus and lower than 1.7 percent annualized rate in November. Report on household spending contracted 0.3 percent in December on annualized rate compared to minus 1.5 percent in previous month. Unemployment rate stays consistent at 3.1 percent.

Bank of Japan remains the monetary policy unchanged while adjusting the GDP growth at 1.4 percent for current fiscal year. Policymakers also forecast the inflation growth at 2.0 percent for fiscal year 2018. Japan’s consumer confidence stagnated at 43.2 in January.

In Eurozone, estimate for consumer prices rise 1.8 percent in January and better than expected. Core prices, excluding food and energy, gained 0.9 percent. Another separate data on prelim GDP for final quarter rose 0.5 percent and beat consensus. Unemployment rate drops slightly to 9.6 percent.

Final manufacturing index in Eurozone rose to 55.2 in January and stays strong in growth. German final manufacturing index gained to 55.2 and best record for past 3 years.

In U.K. net lending to individuals rose GBP4.8 billion in December and slid from previous month. Mortgage approvals for home purchase ae reported at 68,000 in December.

Markit in London reports the manufacturing index expanded at 55.9 in January and persistent in growth recovery. Another release on services index grew at 54.5 and lower than previous month and forecast.

British construction rose 52.2 reading in January. Bank of England keeps official bank rate unchanged at 0.25 percent. Policymakers keep their forecast on inflation in 2017 at 2.7 percent. U.K. economy has proven resilient after the BREXIT referendum in last June.

Technical Forecast

USD/JPY traded lower last week as USD index wanes in demand. This week, we foresee support will emerge at 112.00 region and likely to rebound at 114.00 area. Buying interest is expected to increase if case the trend dips below 112.00 level.

EUR/USD traded in small uptrend last week but resistance has begun to emerge in market. This week, we reckon the trend will take a turn and capped beneath 1.0800 level. Range is expected to move downward and test 1.0600 support in short-term forecast.

GBP/USD has been capped below 1.2700 level after Dollar lost its strength. This week, uncertainty will continue to engulf market while the trend may further dip at 1.2300 region. Range trading is expected and risk control is advised in case the trend moves outside of aforementioned limit.

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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