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Bank of Japan Denies Stimulus in October

A guest post written by DAR Wong

Currency Market Observations – 19 October 2015

Fundamental Outlook

The U.S. manufacturing and retail sales show weakness despite consumer confidence rises in University of Michigan’s survey. Japan is unlikely to implement new stimulus as government is confident of recovery. Eurozone struggles in slow growth with Germany data falling.

The U.S. core retail sales, excluding auto sales, dropped 0.3 percent in September and worse than 0.1 percent revised in previous month. Retail sales rose 0.1 percent from revised par in August. Another report on producer prices slid 0.5 percent in September, making first decline in past 4 months.

American consumer prices were down 0.2 percent below forecast in September while core prices, excluding energy and food, up 0.2 percent and better than forecast. Unemployment claims slid to 255,000 in the week ended 10 September after previous week was revised to 262,000. Another essential measure on manufacturing by Philadelphia manufacturing index in down at minus 4.5 compared to minus 6.0 in September.

The U.S. University of Michigan says its preliminary consumer confidence expands 92.1 this month after it was revised to 87.2 September. Industrial production, including utility and mines, slid 0.2 percent in September and declined for straight second month.

China trade balance rose CNY60.3 billon in September and better than forecast, after exports increased. Another separate report on consumer prices rose 1.6 percent in September on year basis but declined for first time in past 3 months. Producer prices also decline 5.9 percent but in line with forecast.

Japan’s producer prices went to minus 3.9 percent from a year ago in September. Bank of Japan Governor Haruhiko Kuroda demystifies that a fresh round of quantitative easing (QE) in October is unlikely against public expectation. He says inflation prices have been in-line with expectation and expresses confidence for recovery to 2 percent in 2016.

German ZEW economic sentiment that measures the institutional investors’ confidence expanded 1.9 reading and unexpectedly much lower than 12.1 in August. Market analysts reckon this could be the loss of confidence in automobile industry after recent scandal of Volkswagon in cheating emission test.

In Eurozone, trade surplus grew EUR19.8 billion in August and contracted from prior month EUR22.4 billion. On year basis, consumer prices contracted 0.1 percent in September while core prices rose 0.9 percent, showing slow growth in 19 countries bloc using the same currency.

British consumer prices dived at minus 0.1 percent in September from a year ago, making second month in straight decline. Another separate report shows producer prices dropped minus 0.1 percent in September compared to minus 0.5 percent in August.

In U.K., monthly claimant counts in September increased 4600 against forecast decline, after it showed 1200 cases in August. Average earning index of labor cost rose 3.0 percent in 3 months ended August, better than previous quarter ended July at 2.9 percent.

Technical Forecast

USD/JPY has been hovering at 120.00 regions for many weeks as traders are waiting for market stimulus. It may begin to decline since Bank of Japan has clarified its stance. This week, we reckon the trend will be resisted at 120.00 areas with prone bias to decline. Target aims at 116.00 levels. Risk control must be capped at 120.50 levels.

EUR/USD has shown strong resistance at 1.1500 last week. This week, we predict the range will trade from 1.1250 – 1.1500 regions until it break out in either direction. So far, no clue for the potential trend as we believe the fundamental factors are still versatile.

GBP/USD shot back up to 1.5500 unexpectedly last week as Dollar weakened. The trend is strongly resisted at aforementioned areas due to the confluent pressure acted by EMA 200 line. This week, we forecast the trend will be bearish and move from 1.5250 – 1.5500 regions. Abandon your short-view in case the trend pierces above 1.5500 levels.

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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