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Dow Jones Tumbled in Fear-Stricken Sentiment

A guest post written by DAR Wong

Currency Market Observations – 24 August 2015

Fundamental Outlook

The U.S. inflation slacks while rate hike in September remains argumentative. Dow market tumbles as Asia equity markets fall. Japan slows in quarterly growth. Europe stagnates though Germany stays productive in manufacturing. U.K. inflation reveals beginning of growth amid consumer demand.

The U.S. building permits grew 1.12 million in July and lesser than previous month 1.34 million, showing first decline in 4 months. Another separate report on housing starts gained 1.21 million compared to 1.20 million in June.

Monthly consumer prices of Americans rose 0.1 percent in July and below median forecast. Core prices also rose at 0.1 percent after June gained 0.2 percent. Inconsistent growth of consumer inflation has cast doubts on rate hike for coming September.

American existing homes sales climbed 559,000 in July and higher than revised 548,000 in June. Another report on weekly claims for jobless benefits was reported at 277,000 for the week ended 15 August and higher than previous week 273,000 revised data.

Federal Reserve FOMC minutes revealed no clear direction in rate hike. Speculation of credit tightening in coming September stays argumentative among analysts as FED chair Yellen has not indicated her decision However, stock tumbled after middle last week and questioned the probability of rate hike in market as sentiment showed weakness. Dow Jones benchmarks closed at 531 points decline on last Friday.

China equities declined last week after the Yuan devaluation began to drain fund out of capital markets. Global stock prices felt the pinch and receded as investors begin to stay alert of U.S. rate hike fear. China manufacturing PMI dipped to 47.1 compared to 47.8 revised in July.

Japan’s prelim growth for GDP in Q2 ended June dropped 0.1 percent after the Q1 growth was revised at 1.0 percent gains. Exports grew 7.6 percent in July from a year ago. Imports slid 3.2 percent, leaving a trade deficit of JPY268.1 billion (USD2.2 billion).

Trade balance in the 19 euro countries gained EUR21.2 billion in June and reduced from revised EUR23.96 billion in May. Markit reports the German manufacturing PMI in July recovered higher to 53.2 after the prior month was revised at 51.8 gains. Another report on German services index remains steady at 53.6 and in line with median forecast.

U.K. consumer prices rose 0.1 percent in July from a year ago, making first gain since last November. Core prices, excluding fresh food and energy, grew 1.2 percent. Another report on producer prices, indicating factory gate prices from manufacturers, dropped 0.1 percent in July on monthly basis.

U.K. retail sales in July rose 0.1 percent and better than minus 0.1 percent in previous month. CBI industrial order expectation improved to minus 1 in August for the first time in past months, after the July showed minus 10 index in growth.

Technical Forecast

USD/JPY fell below 124.00 levels and closed at 121.92 for the weekend. This week, we foresee the trend may drop further if the Dollar weakens more as the bears may land at 120.50 regions. Resistance will emerge at 123.50 areas and we expect the prices to trade within the aforementioned 300 pips range.

EUR/USD has been very bullish due to weakening of Dollar and also the imminent bailout of Greece upon new government election to be conducted soon. Market will stay in the range from 1.1220 – 1.1450 regions in coming week. Piercing above 1.1450 will climb higher to 1.1850 areas in the event of positive fundamental arising from Eurozone. Risk control needs to be reinforced for short traders.

GBP/USD is still trading sideways with lots of selling interest in market. Technically, we predict the trend is stuck between 1.5550 – 1.5800 ranges while it may move in either direction in coming week. No clue for immediate headway but it will be better to trade in swing method when the prices reach the extreme of the aforementioned range.

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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