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Bank of England Holds Policy Unchanged

A guest post written by DAR Wong

Currency Market Observations – 13 April 2015

Fundamental Outlook

The US jobless claims increase as worsening job data may delay the rate hike policy. Japan stock index receives incoming funds for hitting 20-year high record. UK progresses in steady recovery as the country moves into May election. Bank of England remains policy unchanged to hold the growth.

The US Institute of Management of services index stayed firm at 56.5 in March and remained above index 50.0 as sign of expansion. Weekly claims for jobless benefits recorded 281,000 in the week ended 4 April. Wholesale inventories rose 0.3 percent in February and higher than expectation, underscoring slowdown in market demand.

The US FOMC minutes reveals no immediate rate hike though the credit tightening may come later in the year. However, the slowdown of payroll growth in March has triggered debates among policymakers that US economy may not be ready for rate hike until 2016.

Japan’s current account for February grew JPY 0.6 trillion in February and down from JPY1.06 trillion surplus in previous month. Nikkei 225 Average Index reached 20,000 at 20-year high as hot monies have been pouring in from Asian regions. Market players expect more stimuli to be injected by Bank of Japan to ensure Yen weakening.

Markit says the final service index for 19 countries in Euro zone remains above index 50 at 54.2 in March. German industrial production rose 0.2 percent in February after it contracted at minus 0.4 percent in prior month. Trade surplus recorded EUR19.7 billion against EUR19.6 billion in January.

In UK economy, the service index advanced to 58.9 from February 56.7 reading. Halifax in London reports the Home Price Index upped 0.4 percent in March after it contracted at minus 0.4 percent in previous month.

Another report on UK trade deficit widened to GBP10.3 billion in February from previous month GBP9.2 billion deficit. Manufacturing output grew 0.4 percent in February after it slid at minus 0.6 percent in January.

Bank of England maintains the interest rates at 0.5 percent and the asset purchase program remains unchanged at GBP375 billion.

Technical Forecast

USD/JPY held above 119.00 supports last week and bounced up to 120.00 regions. The market is still range-bound from 119.00 – 121.00 regions as Nikkei benchmarks strengthen. This week, we predict the market may retest above 121.00 to check the bullish strength though resistance still caps at 122.00 levels. Piercing below 119.00 supports need to abandon your long-view.

EUR/USD dropped 400 pips from 1.1000 levels last week as Dollar strengthened. The technical outlook shows strong support demand at 1.0500 regions in-lieu of rebound. This week, we foresee the market will make some small recovery in view of range from 1.0500 – 1.0750 regions. Abandon your long-view if the trend penetrates below 1.0500 levels.

GBP/USD has resumed the bear trend after it broke below 1.4750 supports last week. This week, we reckon the market will continue to decline with resistance emerging at 1.4750 levels in case of pull up retracement. The downside potential may reach 1.4450 as our next support regions.

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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