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Dow Jones Jitters amid Fear in Rate Hike

A guest post written by DAR Wong

Currency Market Observations – 16 March 2015

Fundamental Outlook

The US market players rekindle in fear of imminent rate hike while consumer sentiment drops. Japan commercial companies boost machinery and tools due to weakening currency amid more hope for weakening Yen. UK shows improvement in trade deficits but construction slows due to lesser housing demand.

The US wholesale inventories rose 0.3 percent in January probably due to a slowdown of consumer demand after year-end shopping seasons. Retail sales contracted 0.6 percent in February against a positive forecast. Excluding automobile sales, core retail sales also slid 0.1 percent.

American weekly jobless claims lowered in the week ended 7 March to 289,000 against prior revised 325,000. Another report on producer prices dropped 0.5 percent in February after 0.8 percent slide in January. Excluding food and energy, core prices also contracted 0.5 percent and worse than previous minus 0.8 percent slide.

The University of Michigan says preliminary consumer sentiment in February advances to 91.2 compared to revised gains at 95.4 in prior month. Dow Jones benchmark index was down for second continual week due to fear of imminent rate hike.

Japan’s Gross Domestic Product (GDP) grew 0.4 percent in final quarter and sank below forecast. Bank lending to consumers and business rose 2.5 percent in February from a year ago and remain unchanged from previous month.

Japan’s prelim orders for machinery tools advanced 28.9 percent in February on yearly basis. Weakening of yen might have helped manufacturers increase spending of changing hardware. Traders in market are still hoping for more stimuli from Bank of Japan as USD/JPY stagnates below 122.00 levels.

In Euro zone, industrial output among 19 nations slid 0.1 percent in January versus prior 0.3 percent gains. German consumer prices for grew 0.9 percent in February and matched forecast.

UK manufacturing production, accounts 80 percent of nationwide manufacturing, dropped 0.5 percent in January from previous month and below forecast. Another data on industrial production, including mines and utilities, also slid 0.1 percent from December.

British trade deficit narrowed to GBP8.4 billion in January after it was reported at GBP9.9 billion in previous month. Another report on construction output fell 2.6 percent in January after it rose 0.6 percent in previously, undermined by slowdown in December as the country approaches may election.

Technical Forecast

USD/JPY has been challenging 122.00 levels but still preserving strength in consolidation. This week, we reckon the trend will be support at 120.50 areas while aiming to break above 122.00 immediate resistances. Piercing above 122.00 levels will rise to our next target at 124.00 areas.

EUR/USD settled briefly below 1.0500 as USDX rose to touch 100.00 benchmarks last week. This week, the Euro will remain weak and short-covering will be resisted at 1.0650 areas. Downside has become unpredictable as we foresee many traders may cover profits at 1.0380 – 1.0420 bottoms.

GBP/USD has made 2 long consecutive declines as it closed at 1.4740 for weekend. This week, we predict the resistance will emerge at 1.4850 regions but the chances of further slide remains at large. The down trend may drive to 1.4600 targets in case Dollar continues to surge higher.

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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