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European Central Bank May Begin Tapering in September

A guest post written by DAR Wong

Currency Market Observations – 24 July 2017

Fundamental Outlook

The U.S. reveals growth in housing construction while jobless claims fall. China maintains steady growth in Q2 and Yuan advances. European Central Bank holds monetary policy unchanged and may begin tapering in September.

The U.S. housing permit for June grew 1.25 million while housing permit also rose by 1.22 million, both above forecast and highest in past 3 months’ record.

American weekly claims for jobless benefits ended 15 July dropped to 9-month low at 233,000 with improvement. Philadelphia manufacturing index unexpectedly declines to 19.5 index in July, at 8-month lowest record.

China expanded 6.9 percent in the Q2 ended June and growth remains consistent as in Q1. Industrial production including mines and utilities rose 7.6 percent on year basis in June and highest in past 3 months record. Yuan advances recently against Dollar while Trump’s reputation wanes.

The Bank of Japan remains unchanged in monetary policy and cuts forecast of inflation to 1.1 percent in fiscal year. This is the sixth time since 2013, that policymakers have been pushing the timeline to achieve the 2.0 percent inflation target.

German ZEW sentiment on institutional investors grew to 17.5 and lowest in past 4 months. Final consumer prices in Eurozone for June rose 1.3 percent in year basis and matched forecast.

European Central Bank President Mario Draghi says growth is recovering and the tapering of stimulus may come earlier before December. Market traders Euro currency will appreciate once the stimulus is withdrawn. Last Thursday, European Central Bank held interest rates unchanged.

U.K. consumer prices expanded 2.6 percent in June on year basis and lower than expectation. Producer prices on monthly comparison contracted 0.4 percent after the May data was revised at minus 0.7 percent.

Another report on retail price index grew 3.5 percent on annualized rate and stayed flat from past months. Retail sales grew 0.6 percent in June and better than revised data of minus 1.1 percent in previous month.

Technical Forecast

USD/JPY dropped throughout last week and settled at 111.15 on Friday. This week, we reckon the trend will be supported at 110.50 area and tend to rebound for sideways swing. The movement is likely to move from 110.50 – 112.50 range in mixed trading.

EUR/USD has climbed higher amid weaker Dollar. The week-chart shows the arrival at resistance 1.1650 region in confluence with EMA200 line. In our opinion, there could be a strong selling forces at 1.1680 area that will likely to throw the trend downward this week. Downside support is laid at 1.1450 that will counter the bears if trend falls.

GBP/USD has been trading in small range as traders are focusing at Euro currency. Traders are also waiting for BREXIT negotiation before deciding the new directional trend in Pound. This week, we forecast the range will move from 1.2850 – 1.3100 prone to downward force. Risk control is advised in case of piercing above 1.3100 due to unexpected circumstances.

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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