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Dow Jones Sheds amid Fear from Greece Default

A guest post written by DAR Wong

Currency Market Observations – 20 April 2015

Fundamental Outlook

The US consumer prices rise for second month but capped within consensus. China regulators will terminate margin lending to stock purchase and hammer American equities. Euro zone slows down in demand and fear of Greek default triggers market selloff. British economy remains steady.

The US producer prices expanded 0.2 percent in March after declined 0.5 percent in previous month, but still below forecast. Retail sales grew 0.9 percent and below expectation while core retail prices advanced 0.4 percent from February.

American jobless benefits rose 12,000 to a seasonally adjusted 294,000 for the week ended April 11. Building permit reflecting the groundbreakings increased 2.0 percent to a seasonally adjusted annual pace of 926,000 units, falling below expectation for a straight second month and signal difficulty to bounce off in housing demand.

The US consumer prices rose 0.2 percent in March, rising for 2 consecutive months. Core prices also climbed 0.2 percent and matched forecast. The University of Michigan reports the preliminary consumer sentiment 95.9 in April and better than forecast, keeping optimistic for demands in markets.

On Friday, Dow Jones benchmarks tumbled 279 points after Chinese regulators said would crackdown on margin lending in Shanghai stock markets. European markets also led the decline due to highly possible default by Greece.

China grew 7.0 percent in Q1 and growth is down to 6-year low. Industrial output expanded 5.6 percent in March on annualized rates and lower than prior month 6.8 percent while also below consensus. Together with a lower producer prices released on previous week, market traders are expecting another rate cut in China for this coming quarter to spur growth.

Eurostat reports the final consumer prices in Euro zone declined 0.1 percent in March on annualized rate while final core prices dropped 0.6 percent, both matching the forecast. Another report on trade balance was reduced to EUR26.4 billion in February from prior month EUR30.4 billion.

UK consumer inflation grew at par in March on annual rates and unchanged from previous month. Another report on retail price index rose 0.9 percent annually in March and down from prior month 1.0 percent annual growth.

The UK claimant for jobless benefits was reduced by 20,700 in March and better than forecast, after it was revised at 29,100 counts in February. Unemployment rate improved a little to 5.6 percent in February but at lowest since 2008.

Technical Forecast

USD/JPY has drifted a little lower last week at 119.00 regions. This week, we reckon the market will trade in the band from 118.00 – 120.00 areas while still in consolidating phase. Beware of losses in case the trend violates beyond the aforementioned range.

EUR/USD has proven its strong support at 1.0500 regions and bounces back to 1.0800 levels. This week, we predict the range will be capped from 1.0600 – 1.1000 ranges while still in consolidation. Technically speaking, the market is yet ready to break out of the sideways trend until we see new strength of Dollar.

GBP/USD pierced above 1.5000 on Friday but failed to settle above this benchmark. Thus, we foresee the trend will lose steam if the bulls fail to conquer this resistance in early part of coming week. If the uptrend can sustain above 1.5000 levels, we reckon the bulls will reach 1.5150 soon but failure to do so will trigger a drawdown to 1.4800 supports.

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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