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Crude Declines to 4-1/2 Year-Low while Stocks Dampen

A guest post written by DAR Wong

Currency Market Observations – 15 December 2014

Fundamental Outlook

The US retail sales climb while producer prices weaken amid declining crude prices. Jobs claims continue to stay on low side for progressing employment. Japan is preparing for new parliament after the December election as receding Yen slows down for observation. Crude breaks below USD60 per barrel benchmarks as more liquidation steps into market.

The US wholesale inventories rose 0.4 percent in October and above expected forecast. Ironically, retail sales climbed 0.7 percent in November, matching the highest estimate, after expanded 0.5 percent in prior month. Jobless claims slid 3,000 to 294,000 in the week ended 6 December and have been lying below 300,000 for past 3 months.

The US producer prices fell more than forecast in November, dropping 0.2 percent after followed 0.2 percent advance in the prior month. On the other hand, Thomson Reuters/University of Michigan reports preliminary index of consumer sentiment increased to 93.8 in December, the highest since January 2007, from 88.8 last month, probably due to holiday seasons.

Japan’s core machinery orders rose 4.7 percent in August from the prior month. Revised industrial production grew 0.4 percent in October and better than expected.

Analysts forecast Japanese Yen will continue to weaken if Abe wins the parliament election in December. Respectively, the commercial property market will get another dose of adrenalin if Abe resumes the post of Prime Minister since his cabinet has been aiming to end the long-spell deflation since 2 years ago.

Euro area industrial production grew at small pace in October by mere 0.1 percent gains, below forecast and after grew 0.5 percent in prior month. According to Eurostat, the production drop also softened in November while led by energy prices decline. The output declined in France, Spain and Italy, while it stagnated in Germany, the region’s largest economy.

UK manufacturing dropped 0.7 percent in October after rising 0.6 percent in prior month. Total industrial production fell 0.1 percent after growing 0.7 percent in September. RICS in London says housing price slows down for sixth month in November with the house-price gauge fell to 13, the lowest since May 2013. An housing index for London dropped to minus 40, the least since 2010, from minus 33.

Crude oil dropped below USD60 per barrel after Saudi Arabian Oil Minister Ali Al-Naimi questioned the need to cut supply. He stresses on maintaining market shares despite analysts predict the OPEC countries will cut 300,000 daily productions in 2015. Market settled at USD57 regions for weekend at 4-1/2 year low.

Technical Forecast

USD/JPY reached recent high 121.70 last week and retreats to 118.50 regions. This week, we reckon the fundamental outcome of newly elected cabinet will decide the trend of market while it is ranged from 117.50 supports to 121.00 resistances. The new policy of Yen, if driven by Abenomics again, will continue to drive yen lower against Dollar.

EUR/USD has been staying in the range of 1.2250 – 1.2450 regions as predicted last week. This week, the trend may remain unchanged as the sentiment slows down for Christmas seasons. However, piercing above 1.2450 resistances will test 1.2600 levels as our next target if Dollar weakens due to profit-taking in Dollar index market.

GBP/USD has been trapped inside 1.5550 – 1.5750 as we outlined previously. Moving forward, we reckon the market is also uncertain as activity thins down ahead of year-end. This week, we remain our projected range unchanged as mentioned above but piercing above 1.5750 resistances might test 1.5900 levels.

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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