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China Cuts Interest Rate for Sixth Time

A guest post written by DAR Wong

Currency Market Observations – 26 October 2015

Fundamental Outlook

The U.S. housing data signals possible decline in a year’s time as building permit falls. American stocks climb aggressively after the major companies reported better profits in Q3 results. China cuts interestrates to stimulate weak growth and lifts Western equity. European Central Bank (ECB) hints more stimulus around year end if growth remains sluggish.

The U.S building permit dropped to 1.10 million in September from a year ago and down from revised 1.16 million in previous month. Housing starts in the same period grew 1.21 million on annual rate. Another separate report on existing home sales rose 5.55 million at annualized rate compared to 5.30million in August. Housing demand is stagnating not and may slow into near future from above analysis.

The weekly claims for jobless benefits were reported at 259,000 in the week ended 17 October, almost unchanged from revised from 256,000 in prior week. On Friday, American tech –giants Alphabet, Microsoft and Amazon all beat analysts’ forecast in Q3 profit report and pushed Dow Jones benchmarks into sharp rise for closing prices.

China cut interest rates on Friday after Asia market close. People’s Bank of China (PBoC) reduced 25 basis points for the sixth time since last November in lending rate to 4.35 percent. News has helped to lift American and European markets before weekend. Traders are waiting for further reaction to induce into Asia markets on coming Monday.

Consumer confidence in Eurozone drops to minus 8 in October from minus 7 last month. Leading economy – Germany stays stagnate in manufacturing index after Markit reported the Purchasing Manager’s Index at 51.6 in October, compared to 52.3 last month.

European Central Bank (ECB) held monetary policy unchanged in last Thursday’s meeting. Interest rate remains at record low 0.05 percent. Central Bank President Draghi says policymakers may increase another round of easing policy in December if needed. Euro currency fell and European stocks climbed after the remarks.

U.K. retail sales grew 1.9 percent in September on monthly basis after it was reported at minus 0.4 percent in previous month. Pound was trading lower after entailing Euro currency as Dollar jumped up before weekend.

Technical Forecast

USD/JPY reversed into a potential uptrend after mid last week. Market may ascend higher in coming week due to strengthening Dollar. Technically, we reckon strong support will build up at 120.50 and probably will aim for 124.00 very unexpectedly in near future. Risk control is advised if the trend goes adverse to you.

EUR/USD has gone into a potential falling trend after the remarks made by ECB President Draghi. This week, we foresee the trend will be prone to bearish sentiment with resistance emerging at 1.1200 regions. Potential target might decline to 1.0800 regions again in near future as demand turns weak.

GBP/USD is following the down move as Dollar strengthens against European currencies. This week, we predict a potential bear trend will move from 1.5400 to 1.5200 ranges. However, breaking below the 1.5200 supports will likely challenge the next very strog support at 1.5100 levels before moving into sideways.

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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