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Bank of Japan Rules out Helicopter Money

A guest post written by DAR Wong

Currency Market Observations – 25 July 2016

Fundamental Outlook

The U.S. housing data shows recovery while manufacturing slides. European Central Bank holds monetary policy unchanged after meeting. U.K. reveals better earnings and cut down in government’s borrowing, despite inflations slows in retail demand.

The U.S. building permits rose 1.15 million in June and matched forecast. Housing starts gained 1.19 million in same month after it revised at 1.14 million data in May.

Weekly claims among Americans for the week ended 16 July was at 253,000 and little changed from previous week. Another report on Philadelphia manufacturing contracts 2.9 in July unexpectedly versus 4.7 gains in June.

Bank of Japan’s Kuroda rules out the application on using helicopter money to stimulate recovery. Yen reverses stronger against Dollar while leading Asia stocks fall.

German ZEW sentiment that measures institutional investors’ confidence slides 6.8 unexpectedly and against positive forecast, after May showed 19.2 gains. The consumer confidence in Euro bloc of 19 nations slid to minus 8 in June and worse than minus 7 in May. Current account in May also dropped to EUR30.8 billion surplus from EUR36.4 billion ion previous month.

European Central Bank holds monetary policy unchanged. Overnight refinance rate maintains at zero while deposit rates charges at minus 0.4 percent on annual basis. President Draghi has not revealed details on further stimulus despite showing concerns for banks.

U.K. consumer prices climbed 0.5 percent in June, best in past 3 months and higher than expectation. Another data on producer prices dropped to 1.8 percent in June from 2.2 percent in prior month.

The average earnings of U.K. citizens on quarterly seasons ended May went up 2.3 percent and better than prior data 2.0 percent. The change of jobless claimants was down by 400 cases after May jumped by revised 12,200 filings.

U.K. retail sales slid 0.9 percent in June after gaining 0.9 percent in May. Public net borrowing has reduced to GBP7.3 billion and fell from GBP9.4 billion in May.

Technical Forecast

USD/JPY topped off 107.45 last week and might begin to fall this week. Technically, we reckon strong resistance will lie at 107.50 – 108.00 regions and probably drive the trend down. Our immediate target aims at 102.50 areas in case of turning down. The withdrawal of additional stimulus in Bank of Japan could begin to drive the market in new southern direction.

EUR/USD settled at 1.0975 bottoms throughout last week’s range. We expect the trend to hold above 1.0930 levels and drive the prices higher to 1.1160 in coming week. Abandon your long-view in case of breaking beneath 1.0930 supports.

GBP/USD has been holding well above 1.3100 areas and might rise higher this week. We forecast the range will move upward from 1.3100 – 1.3450 levels while Dollar might devalue. Trade with caution and manage your long position in case of plunging below 1.3100 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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