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Emerging Market Crisis Looms as Currencies Fall

A guest post written by DAR Wong

Currency Market Observations – 3 September 2018

Fundamental Outlook

The US economy grows in Q2 and highest in almost past 4 years. Trade talk with Canada rattles as the negotiation will continue this week. European economy shows sign of slowdown as consumer prices miss consensus data. Fear of emerging currency crisis looms after Argentina and Turkish currencies declined.

The US Conference Board of Consumer Confidence climbed to 133.4 in August and better than forecast. Another report on GDP in Q2 season jumped 4.2 percent gains and best in nearly 4 years. Pending homes sales slid 0.7 percent against 1 percent gains in June.

The US consumer spending rose 0.4 percent in July and matched forecast. Weekly claims for jobless benefits at 213,000 and matched expectation.

Trump administration says they will consider another tariff of USD200 billon on Chinese imported goods in September. The trade talk with Canada has not reconciled and President Trump mentions he wants a settlement deal within 90 days.

Argentina and Turkish currencies fall amid weakness in emerging markets, causing worries on currency crisis that may lead into next year.

China’s manufacturing index rises to 51.3 in August and matched forecast. Another report on services index performs higher than consensus at 54.2 reading.

German Ifo business climate rises to 103.8 in August and highest in 5 months. Another report on consumer prices grew 0.1 percent in August and in line with forecast, though July rose 0.3 percent.

The Eurozone consumer prices grew 2.0 percent in August while core prices gained 1.0 percent. Both missed the forecast slightly.

UK mortgage approvals stagnated at 65,000 in July. Consumer borrowing slowed down to GBP4 billion and lower than June GBP5.4 billion.

Technical Forecast

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USD/JPY topped the 111.70 region last week and fell before weekend. This week, we reckon the Dollar will climb again and pull up the market. Range is expected to move tightly from 110.50 – 111.70 region but piercing through the either side will lead a new directional headway. Overall trend is prone to rise.

EUR/USD traded in mild selling sentiment last week. This week, initial range is expected to move from 1.1530 – 1.1730 region wile waiting for a breakout on either end. It will be crucial to observe Dollar Index (USDX) for leading the direction in this market pair.

GBP/USD is trading on a mild recovery trend. Technically speaking, the trend is supported at 1.2900 level and likely to rise further this week if it breaks above 1.3050 area. Higher target might aim at 1.3250 on the breakout. However, reversing beneath 1.2900 needs to abandon this uptrend view.

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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