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Bank of Japan Holds Policy Unchanged

A guest post written by DAR Wong

Currency Market Observations – 23 November 2015

Fundamental Outlook

The U.S. Federal Reserve FOMC meeting minutes shows possible rate hike as favored by policymakers. Housing starts grow moderately while jobless claims stagnate in decline. Japan remains monetary policy unchanged. European Central Bank hints of adding more stimuli in near future.

The U.S. consumer prices rose 0.2 percent in October from minus 0.2 percent in prior month, rising speculation again on possible rate hike in December. Core prices, excluding food and energies, also gained 0.2 percent as expected. Industrial production, including mines and utilities, shrank 0.2 percent in same month.

The monthly U.S. housing starts increased 1.06 million annualized rates in October but lower than median forecast. Another data shows housing permit rose 1.15 million from a year ago versus 1.11 million annualized rates in September.

American jobless claims at 271,000 in the week ended 14 November. The Federal Reserve FOMC meeting minutes release shows highest bet in a year for possible rate hike in short-term rates.

Japan’s prelim GDP for Q3 contracted 0.2 percent from minus 0.3 percent in previous quarter ended June. The trade deficits narrowed down to JPY 200 billion in October from revised JPY310 billion deficits in previous month, making first recovery in past 3 months.

Last week, Bank of Japan kept its monetary policy unchanged even as the exports fall, first time in a year due to weakening demand from China. Monetary expansion remains at JPY80 trillion yearly.

German ZEW economic sentiment that measures institutional investors’ confidence rises to 10.4 in November and unexpectedly performed much better than previous month at 1.9 reading.

European Central Bank’s governor Draghi hints again on adding further stimulus December to combat low inflation. In the 19 nations, current surplus grew EUR29.4 billion in September and higher than EUR18.7 billion in August. Consumer confidence advanced to minus 6 from minus 8 in September.

British consumer prices declined 0.1 percent in October from a year ago but matched the forecast. Annual core prices gained 1.1 percent from a year ago. Retail price index gained 0.7 percent in October from a year ago and dropped from 0.8 percent in previous month.

U.K. retail sales slid 0.6 percent in October on monthly basis after it gained revised 1.7 percent in prior month. Another report on CBI industrial order expectation for November improves to minus 11 from previous month minus 18.

Technical Forecast

USD/JPY could not jump above 124.00 levels and recede back to 122.50 regions. Market traders are disappointed of no further stimulus from Bank of Japan. This week, we reckon the range might head down to 121.50 areas while trading sideways from 121.50 – 123.50 regions.

EUR/USD traded sideways last week and hovered around 1.0650 before weekend. This week, we foresee the supports lie at 1.0600 areas. There is potential to break below this support and head down to 1.0500 bottoms. However, reversing up above 1.0600 will possible climb to 1.0750 again.

GBP/USD has revealed strong resistance at 1.5300 regions last week. This week, we forecast the trend will travel downwards to 1.5000 major levels for testing the bear strength. Picking short entry from daily pull up retracement with risk control may yield better profitability.

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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