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European Central Bank May Ease Policy Soon

A guest post written by DAR Wong

Currency Market Observations – 30 November 2015

Fundamental Outlook

The U.S. home market sees mild recovery in demand while prelim estimate on GDP projects growth. Jobless claims slide back to 5-week low at 260,000 filings. Japan slumps in consumer spending amid stagnated inflation. European investors observe central bank meeting in coming week for possible easing policy.

The U.S. existing homes sales grew 5.36 million in October and below forecast. The Conference Board of consumer confidence reports a slide at 90.4 in November after it rose to 99.1 revised in October, despite Dollar has strengthen for past 1 month.

Prelim GDP for Q3 rose 2.1 percent and better than expected. Another report on core durable goods, excluding transport equipment, rose 0.5 percent from revised minus 0.3 percent in September.

American weekly claims for jobless benefits reduced to 260,000 in the week ended 21 November at lower record. New home sales increased 495,000 in October compared to 445,000 in previous month, backing moderate rise in home demand.

Japan’s national core consumer prices stagnates at minus 0.1 percent in November while Tokyo city hovers at par grows. Unemployment improved at 3.1 percent in October from previous month 3.4 percent. Household spending dropped to minus 2.4 percent in October and worse than last time, signalling slowdown in market demand.

German manufacturing PMI expanded 52.6 in November but holds back further growth. French manufacturing PMI also floats above 50 benchmarks at 50.8 index.

Another separate report shows German final GDP expanded 0.3 percent in Q3 and same as previous estimate. The Ifo business climate reports the gains at 108.2, highest since June 2014.

U.K. second estimate for GDP in Q3 expanded 0.5 percent and same as forecast. The prelim report on business investment in 3 months ended September rose 2.2 percent better than revised 1.6 percent gains in second quarter.

Technical Forecast

USD/JPY stagnated in trading range last week. Technically, we foresee the resistance will emerge strong at 123.50 regions while bears may emerge once the Dollar begins to correct. Possible drawdown may reach 121.00 in near future with risk control set at 123.50 levels.

EUR/USD is slowing down in fall despite reversal strength is not spotted yet. This week, it is important to observe the European Central Bank meeting since easing policy tends to pull up euro value in past record. Support lies at 1.0500 while pull up will aim at 1.0750 as immediate target.

GBP/USD closed at 1.5030 for weekend in bear sentiment. We reckon some buying interest will emerge at 1.4950 areas before the trend goes sideways. Range is expected to move from 1.4950 – 1.5150 regions for this week. Risk control must be tightened in case the price movement goes beyond 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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