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Conservatives Secures Winning in British Election

A guest post written by DAR Wong

Currency Market Observations – 11 May 2015

Fundamental Outlook

The US trade deficits surge again on increasing imports. Payrolls rise and reach the expectation that lifts the Dow Jones markets in optimism. Greek moves in slow progressives for negotiating bailout program with European Union and may fail the repayment deadline in early next week. Focus has been put in Britain election with fruitful result in landslide victory for Conservatives Party.

The US Commerce Department reports the factory orders increased 2.1 percent in March, largest gains in past 8 months, after a revised 0.1 percent dip in February. Another report on trade deficits surged to its highest at 6-1/2 year record after imports increased. The Commerce department says the trade deficits jumped 43.1 percent to USD51.4 billion, the largest since October 2008, after the shortfall was revised at USD35.9 billion in February.

The Institute for Supply Management (ISM) said its services index was 57.8 in April and better than 56.5 reading revised in previous month. American non-farm productivity fell in Q1 probably due to harsh winter and labor short squeeze. Productivity declined at a 1.9 percent annual rate after dropping at a revised 2.1 pace in the fourth quarter.

The US weekly claims for jobless benefits were reported at 265,000 in the week ended 2 May, lower than forecast and versus 262,000 in previous week. Monthly nonfarm payroll released for April rose to 223,000 after followed a revised 85,000 gains in March. Jobless rate fell to 5.4 percent, lowest since May 2008.

In a separate report on wholesale inventories was up 0.1 percent in April, below forecast and also lesser than 0.2 percent in previous month. Before the weekend, Dow Jones benchmarks celebrated 267 points gains at closing after optimistic job data and reducing inventories reported.

Markit reports the final manufacturing index in Eurozone held up at 52.0 in April, matching the forecast. Germany registers a trade surplus of EUR19.3 billion in April and lesser than EUR20.0 billion in previous month.

Greece is still in negotiation with European Union (EU) officials to settle the debt repayment though Greek Prime Minister Alexis Tsipras remains optimistic of securing the about program. However, international lenders doubt it can be settled by deadline on coming Monday to get through a crucial installment of EUR750 million to International Monetary Fund (IMF) on Tuesday.

Markit in London says the UK construction activity dropped to 54.2 in April, lower the forecast and prior month 57.8. The service index rose to 59.9 in Aril and better than forecast. Trade deficits widened to GBP10.12 billion from GBP10.8 billion in March.

Before weekend, British polling results showed landslide victory for the Conservatives who have captured 331 winnings out of 650 seats in the house, while Labour Party secured 232 seats. Cameron’s victory means he will re-negotiate the British membership to stay in the European Union.

Technical Forecast

USD/JPY has been hovering around 120.00 regions as traders widely expect another stimulus may be coming soon. Trend is still constricted from 118.00 – 121.00 range as traders continue to observe the breakout in either way to move in new direction. Personally, we favor on upside potential.

EUR/USD has begun to fizzle out from recent 1.1391 tops. Market might have completed the upward correction and prone to move lower in coming weeks. This week, we foresee the market will trade from 1.1050 – 1.1400 ranges with higher probability to sell down on weak Euro.

GBP/USD stayed in bullish sentiment last week for polling, especially after the winning was confirmed by single party. Technically, we foresee the market is resisted at 1.5550 with triple-top formation. This week, support will emerge at 1.5150 regions while we foresee the trend will trade in profit-taking from long traders from higher prices. Range is expected from 1.5150 – 1.5550 regions.

Dar Wong

This post is contributed by OPF Guest Blogger, DAR Wong.

DAR Wong is an approved fund manager in Singapore with 25 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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