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FED Policymakers Target 2 Percent Inflation

A guest post written by DAR Wong

Currency Market Observations – 02 February 2015

Fundamental Outlook

The US new home sales surprises market with strong gains with surging consumer confidence. FED policymakers stress steady growth in American economy with imminent rates hike. Japan improves on export growth but household spending shrinks due to higher sales tax. German steadies in job growth while UK slips into hawkish outlook for home loans.

The US new homes sales grew 481,000 in December from a year ago while stronger than forecast and prior month. The Conference Board of consumer confidence jumps to 102.9 in January and far better than forecast, probably pulled up by recent Dollar rise.

American orders for core durable goods, excluding transportation and equipment, records at minus 0.8 percent in January against a positive forecast. The US unemployment claims for the week ended 24 January fell to 265,000 after it was revised at 308,000 in prior week.

The US final GDP for final quarter slipped to 2.6 percent after revised 5.0 percent gains in previous quarter. According to FOMC statement, policymakers reassured of steady growth and will continue to aim at 2 percent inflation, but interest rate hike may come faster than expected. Gold prices slid to USD1260.00 per ounce after the remarks.

Japan’s trade deficits narrowed to JPY710 billion in December compared to revised JPY830 billion in previous month, underscoring better exports due to weaker yen. Core consumer prices rises 2.5 percent in January from a year ago after it was reported at 2.7 percent gains last month.

Japan’s jobless rate stays healthy at 3.4 percent in January. Another report on household spending contracted to minus 3.4 percent in January on annualized rates versus minus 2.5 percent in December, probably due to higher sales tax.

German Ifo business climate report shows the January index at 106.7, moving on track with moderate growth. The prelim estimate for German consumer prices in January contracts at minus 0.1 percent after it was reported at par in December. However, another report on jobless change in December was better off at minus 9,000 versus minus 25,000 in previous month.

Eurozone’s consumer prices fell to minus 0.6 percent annualized rates in January and below forecast. Core prices remain at 0.6 percent from a year ago and lower than 0.7 percent annualized rates in December.

The UK prelim GDP for final quarter was 0.5 percent after it rose 0.7 percent in previous 3 months through September. British Bankers’ Association says the mortgage for January dropped to 35,700 from previous month 36,700 applications.

Technical Forecast

USD/JPY has been trading in very tight range from 117.25 – 118.66 regions. The market is waiting for a breakout in coming week while still uncertain of its direction. Technically, we reckon it is more prone to see decline at 115.00 targets. Beware of piercing above 118.66 resistances that may return to 120.00 regions.

EUR/USD has shown a reversal bar on weekly chart as it closed at 1.1282 for weekend. This week, we foresee the market will be supported at 1.1100 areas in case of drawdown again. However, failure to break down below this support will yield high probability of short-covering. Market may return to 1.1600 regions if short traders cover for profits.

GBP/USD has been consolidating in sideways trend but slowed down in decline. This week, we predict the market might pull up for retracement from 1.5000 – 1.5250 ranges if Dollar begins to correct downward against major currencies. Break below 1.4950 supports need to abandon your long-view.

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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