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China Reports First Trade Deficit in 2 Years

A guest post written by DAR Wong

Currency Market Observations – 13 March 2017

Fundamental Outlook

The U.S. economy adds jobs that increase possibility of rate hike in coming week. Crude prices decline by the jump in shale oil production among U.S. manufacturers. China reports trade deficit for first time in 2 years amid low consumer prices. European Central Bank holds policy unchanged while observing the slowdown in economic progress.

The U.S. factory orders rose 1.2 percent in January and matched forecast. Trade deficit widened to USD48.5 billion in January compared to USD44.3 billion in previous month.

The U.S. weekly claims for jobless benefits remained stagnated at 243,000 last week while it bounced off 44-year low record. Monthly payroll adds 235,000 jobs in February and best record in past 7 months. Unemployment stays at 4.7 percent.

The U.S. crude inventory on weekly basis rose 8.2 million barrels for 4 March and much higher than expectation. Saudi energy official warns U.S. oil firms not to increase shale oil production by leveraging on the OPEC cut. The statement comes after WTI Crude prices plunge below USD50.00 per barrel with increasing supply from America.

China reports a rare trade deficit for first time since February 2014 with CNY60 billion gap. Export dropped 1.3 percent while import jumped 38.1 percent. Consumer prices surprisingly grew at 0.8 percent only in February on year basis, falling for first time below 1.0 percent benchmark in 2 years. Producer prices jumped 7.8 percent from a year ago after rising 6.9 percent in January.

Japan’s GDP rose 0.3 percent in Q4. Current account surplus expanded JPY1.2 trillion in January but below JPY1.66 trillion in previous month.

Eurozone reports the revised GDP for Q4 at 0.4 percent gains and unchanged from previous quarter. European Central Bank keeps the policy unchanged by maintaining the refinance interest rate at zero level. Bank’s overnight deposit rate stays at minus 0.4 percent while policymakers forecast 1.8 percent growth in 2017.

U.K. manufacturing production slumped 0.9 percent in January from 2.2 percent gains in previous month. Trade deficits for January at GBP10.8 billion gap between exports and import data.

Technical Forecast

USD/JPY advanced back to 115.00 last week in mild bullish sentiment. Technically, the trend will be supported at 113.20 region this week with a possibility to pierce above 115.50 resistance. Breaking above this tight range will aim for 117.50 as our next target.

EUR/USD took a reversal uptrend on Friday after European Central Bank maintained policy unchanged. The trend may be resisted at 1.0700 as predicted last week while moving sideways above 1.0500 support. Only closing above 1.0700 level will initiate a new buying interest for coming week.

GBP/USD is going back to 2-month low as the trend approaches 1.2150 level. The trend is moving into bear sentiment unless it could close above 1.2300 levels again. This week, we are observing the major benchmark at 1.2000 as support with a possible sideways before Thursday. Breaking beneath 1.2000 support will indicate new bears.

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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