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FED Yellen Hints Imminent Rate Hike

A guest post written by DAR Wong

Currency Market Observations – 21 November 2016

Fundamental Outlook

The U.S. jobs claims contract to 43-year low with rising manufacturing. FED Yellen hints on possible timing for rate increment. Europe may fall into resurging crisis on reform constitution to be voted in Italy in December. Britain shows inflationary data on consumer prices and retail sales.

The U.S. retail sales gained 0.8 percent in October. Core retail sales, excluding transport equipment, also rose 0.8 percent and highest in past 6-month record. Another separate report on industrial production stayed unchanged in October versus minus 0.2 percent revised in previous month.

Producer prices also unchanged but fell below forecast. Core prices, excluding food and energy, fell 0.2 percent and negative for first time in past 3 months. The U.S. jobless claims was at 235,000 for the week ended 12 November, lowest in 43 year. Consumer prices grew 0.4 percent in October and core prices at 0.1 percent gains. Building permits expanded 1.23 million in October and beat expectation.

The U.S. FED chair Yellen hints that rate hike would be relatively soon. Before the weekend, the Leading Economic Index (LEI) rose 0.1 percent in October, slower than 0.2 percent increase in September.

China’s industrial production rose 6.1 percent in October on annualized rates and matched forecast. China has announced the commencement of Shenzhen-Hong Kong Market Connect on 21 November that might attract global liquidity into the aforementioned equity markets.

Japan beats expectation in GDP growth for Q3 by gaining 0.5 percent versus revised 0.2 percent growth in Q2. Japan’s Prime Minister will meet U.S. President Trump on this week to discuss the concerns of scrapping Trans-Pacific Pact agreement signed under Obama’s administration.

German preliminary GDP for Q3 grew 0.2 percent and lowest in this year, after Q2 expanded 0.4 percent. Another report on German ZEW sentiment that measures institutional investors rises to 13.8 from 6.2 October and best record in past 5 months.

Italian banking stocks came under renewed pressure on Friday on growing jitters before the 4 December referendum on a constitutional reform which could unseat Prime Minister Matteo Renzi.

U.K. consumer prices gained 0.9 percent in October from a year ago. Producer prices input on monthly basis rose 4.6 percent unexpectedly after it grew 0.1 percent in September.

U.K. claimant count increased 9,800 and higher than revised 5,600 in September. Average earnings on quarterly basis ended September grew 2.3 percent in and matched expectation. Retail sales grew 1.9 percent in October and best record in past 9 months.

Technical Forecast

USD/JPY went up more than 300 pips last week. Market may head to above 111.00 in coming week before liquidation for profits. Technically, we are looking at 108.50 in case of correction while climbing further will reach 111.80 as next target.

EUR/USD has been down for past 10 market days without correction. This week, we foresee the support will emerge at 1.0500 areas and reversal will head up to 1.0750 levels in case of short-covering. Market has sunken into weak sentiment due to resilient rising Dollar.

GBP/USD has shown bearish pattern on Friday closing. This week, the trend may fall further if the prices could not escalate above 1.2400 resistances. Technically, we predict the bear will move down inside the range of 1.2100 – 1.2400 regions. Market attention may switch from euro to pound for new selling interest.

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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