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Crude Dip Reflects Persistent Recession

A guest post written by DAR Wong

Currency Market Observations – 16 November 2015

Fundamental Outlook

The U.S. producer prices remain weak and deter expectation for rate hike. Retail sales grow in small pace while weekly jobless claims stay at high level. Japan declines in current account and producer prices are sluggish. European Central Bank stresses again on further easing if needed to spur growth. Crude prices slide to double bottom at USD40 per barrel.

The U.S. import prices fell 0.5 percent and more than expectation in October due to weakening crude prices and falling demand. Weekly jobless claims ended on 7 November records at 276,000 and above forecast.

In a speech delivered by FED chair Janet Yellen last week, she steered away from mentioning monetary policy and reiterated that economic data needs to be supportive for further rate hike to be justifiable.

American core retail sales, excluding automobile, rose 0.2 percent in October from minus 0.4 percent in previous month. Producer prices dipped below par for consecutive 2 months at minus 0.4 percent in October. Clearly shown, manufacturing slows and puts lid to recovery growth.

China’s industrial production stayed buoyant at 5.6 percent growth in October from a year ago. Consumer prices expanded 1.3 percent on annual basis and lower than 1.6 percent in September. Another report on factory gate prices contracted 5.6 percent and remained sluggish.

Japan’s current account surplus records JPY780 billion in October and making first decline in 3 months. Bank loans to consumers and businesses remain almost unchanged at 2.5 percent in October from a year ago.

Japan’s core machinery orders rose 7.5 percent in September and surprises market. Another report on producer prices contracted 3.8 percent in October from a year ago and stayed at negative range for 7 months in a row. Revised industrial production grew 1.1 percent in September and better than expected.

German trade surplus expanded at EUR19.4 billion in September, falling for second consecutive month for slowdown in exports. Another report on consumer prices stagnated at par in October from previous month. French reported a meagre 01 percent growth in consumer prices for the same month.

German prelim GDP for Q3 is expected to expand 0.3 percent as forecast. In Eurozone, trade surplus among 19 countries grew EUR20.1 billion in September and better than revised EUR19 billion in prior month. European Central Bank President Draghi hints of possible monetary easing in December, warning that signs of a sustained turnaround in core inflation had weakened.

The U.K. claimant for jobless benefits increased by 3,300 in October compared to 500 cases in previous month. Unemployment rate was down to 5.3 percent in October.

On Friday’s close in U.S. market, crude prices dipped again to USD40 per barrel and revisited the 5-year low record that was tested in August. Recession may be exercising its whiplash if oil prices continue to drop in coming weeks.

Technical Forecast

USD/JPY has stagnated above 123.00 levels as buyers begin to take profits. This week, we foresee the range will trade from 121.50 – 123.00 and prone to be downwards. Control risk in case of reversing up since market analysts are still expecting new stimulus surprise from Bank of Japan.

EUR/USD has been trading in sideways last week. Technical patterns are uncertain as market traders are waiting for firm action from European Central Bank in December. This week, we expect the range to move from 1.0650 – 1.0850 regions while either direction is possible. Observe closely to fundamental news for market momentum.

GBP/USD has reached temporary support at 1.5050 regions while making a small correction. Technically, we reckon the trend will move from 1.5050 – 1.5400 in coming week. Ideally, we prefer to pick short entry from pull-up retracement as major trend is heading down on strengthening Dollar.

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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