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American Payroll Grows in Steady Pace

A guest post written by DAR Wong

Currency Market Observations – 10 October 2016

Fundamental Outlook

The U.S. payroll grows in small pace that hampers potential rate hike until end of year. Japan slows down in growth but Yen drops out of profit taking in USD/JPY market. Eurozone poises for steady economic pace while British Pound slides into panic selling due to initiation of BREXIT announced by Theresa May.

The U.S. Institute of Supply Management reports manufacturing index at 51.5 in September and above 50 benchmarks. The separate report on service index by same institution rose to 57.1 in September and highest in a year’s record. Another report on factory orders from manufacturers gained 0.2 percent in August versus 1.4 gains growth in prior month.

The U.S. weekly claims for jobless benefits for the week ended 1 October dropped to 5-month low at 249,000. American non-farm payroll for September reports at 156,000 in steady growth though below expectation. Unemployment rate went higher to 5.0 percent versus 4.9 percent in August. Market analysts expect no rate hike until December.

Japan’s Tankan report on quarterly performance ended September rose to 6 index and unchanged from last 2 quarters, indicating slow growth. Yen devalues from rising USD/JPY as some profits are seen during the China’s long holiday.

German factory orders rose 1.0 percent in August after 0.4 percent revised gains in previous month. Another report on industrial production including mines and utilities advanced 2.5 percent in August from minus 1.5 percent data in July.

In Eurozone, German final manufacturing in September stays at 54.3 while French final manufacturing at 49.7, both in line with forecast.

Markit in London reports the U.K. manufacturing index at 55.4 in September and highest in past 12 months’ record. The construction index continues to rise to highest in 6 month record after September data clocks 52.3 reading.

Another data release from on U.K. services index steadied at 52.6 in September and poised above 50.0 benchmarks for consecutive month, indicating growth. The industrial production gained 0.2 percent and highest in 4 months. Trade deficits from national imports/exports contracted further to GBP12.1 billion in August from minus GBP9.5 billion in July.

Pound slid tremendously last week after Prime Minister Theresa May announced the execution of BREXIT sometime in early next year. GBP/USD declined almost 6 percent from 1.2700 tops and recovered within a day from 1.1950 bottoms. Market analysts expect further drop in Pound value year-end seasons.

Technical Forecast

USD/JPY reached above 104.00 briefly last week and fell back to 103.00 areas. Technically, we foresee the market will move from 101.50 to 104.00 this week and prone to consolidate for a while. The trend is likely to continue fall after China investors return from long holiday.

EUR/USD has tried to stabilize despite Pound drop. Moving forward, we reckon Euro will begin to move opposite to Yen as counter balance since Pound will be uncertain. This week, support will emerge at 1.1150 regions and toppish at 1.1350 levels. Abandon your long view if the trend falls below 1.1150 levels.

GBP/USD has faced liquidation due to fear of imminent BREXIT action. This week, we expect the bears to continue to engulf market trend with resistance pressing from 1.2600 levels. Driving back to 1.2100 regions is highly possible if there is no positive news to lift Pound sentiment.

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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