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Crude Dips to 12-year Low before USD30/Barrel

A guest post written by DAR Wong

Currency Market Observations – 18 January 2016

Fundamental Outlook

The U.S. economy stays sluggish despite non-farm payroll grew in December. Crude oil slides to 12-year low beneath USD30 per barrel and drags stock prices down. Eurozone economy remains hawkish while Bank of England keeps status-quo on interest rate decision.

The U.S. unemployment claims rose to 284,000 in the week 9 January and higher than forecast. Core retail prices, excluding automobiles, plunged 0.1 percent in December after previous month was revised at 0.3 percent gains. Producer prices also slid 0.2 percent after rising 0.3 percent in November.

On Friday, U.S. Crude oil plunged to below USD30 per barrel for first time to 12-year low record. Weak demand in energies confirms the global recession and pull down stock prices. Dow Jones benchmarks declined 504 points throughout whole of last week.

China reports trade surplus at CNY382 billion in January and against lower forecast. However, manufacturing and consumer prices have slowed down in Chinese economy. Many analysts say this might have caused slow recovery in the ASEAN regions.

Japan’s machinery order declined to 18-month low after November data dropped 14.4 percent. Producer prices slid 3.4 percent in January from a year ago versus 3.6 contraction in December.

In Eurozone, trade surplus rose EUR22.7 billion in November and highest in 7-month record. Euro currency has been moving sideways despite recent devaluation in U.S. Dollar. Effect of stimulus extension by European Central Bank makes investors put on action on hold to selling Euros.

U.K. manufacturing output slid 0.4 percent against positive forecast in November. Another report on industrial production, including mines and utilities, dropped 0.7 percent from October. Construction output dropped 0.5 percent in November after gaining 0.2 percent in prior month.

Bank of England remains interest rate unchanged at 0.5 percent in the central meeting. Asset purchased program stays at GBP375 billion while 8 officials voted for no rate increment among 9 committee members.

Technical Forecast

USD/JPY slid on Friday after Crude declined. Market closed at 116.76 for the weekend in bear sentiment. This week, we reckon the market might reach 116.00 bottoms before bargain-hunting steps into market. Initial resistance will emerge at 118.00 – 118.30 regions in case of upward retracement.

EUR/USD shows much uncertainty as it closed at 1.0916 on Friday. Technically, we foresee the imminent range will be constricted from 1.0780 – 1.1000 regions without clue. However, we feel the upward trust is more prone in coming week due to new momentum spotted in our analysis. Breaking above 1.1000 levels may climb higher to reach 1.1200 areas.

GBP/USD traded lower after Bank of England held unchanged in monetary policy. The market is testing almost 6-year low at 1.4250 areas now with some support surfacing. This week, we predict the trend may recover but trade within 1.4200 – 1.4450 ranges. Observe the Dollar trend as leading factor.

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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