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FED Yellen Worries of Flat Inflation May Obstruct Hike

A guest post written by DAR Wong

Currency Market Observations – 17 July 2017

Fundamental Outlook

The U.S consumer prices stays flat and worries Federal Reserve (FED) Yellen for deviating from plan of rate hike. China grows in steady pace from inflation rise and trade surplus. U.K. expands in claimant count while unemployment rate rises.

The U.S. weekly claims expanded 247,000 in the week ended 6 July and matched forecast. Producer prices rose 0.1 percent in June and above forecast. Core producer prices, excluding food and energy, also rose 0.1 percent but below expectation.

American consumer prices laid flat in June while core prices rose 0.1 percent, both were below forecast. Another report on retail sales and core retails were both sunken 0.2 percent and also below consensus.

FED Yellen clarifies her remarks made few weeks ago that the subprime crisis has made the financial system stronger, but could not discount the possibility of another strike in such crisis. Before the weekend, she also expresses concern on low inflation in congressional committee when she says this would deviate from the policy path planned earlier. Policymakers initially predicted the low inflation could be temporary and would not hamper the growth.

China’s consumer prices rose 1.5 percent in June from a year ago. Producer prices expanded 5.5 percent in the same month on year basis. Both data remained steady and matched forecast. Another report on trade surplus rose CNY294,000 approximately at USD42.8 billion, in June and highest record in past 5 months.

Japan’s core machinery orders contracted 3.6 percent in May and worse than previous month, against a positive consensus. Revised industrial production shrank 3.6 percent in May and worse than consensus.

British average earning over the 3 months ended May rose 1.8 percent and matched forecast. Claimant count for jobless benefits rose 6,000 in June but lower than expectation and compared to revised 7,500 in May. Unemployment rate dropped to 4.5 percent in May.

Technical Forecast

USD/JPY has begun to drop after hitting 114.50 top recently. This week, we predict the trend will continue to decline at 111.50 region before moving into sideways. Range is expected to be constricted in mixed sentiment for 1-2 weeks if the aforementioned support could hold at 111.00 – 111.50 region.

EUR/USD spiked on Friday and closed at 1.1460 level. Market will be very tricky this week as the bull might charge above 1.1500 resistance and climb higher to 1.1600 target. Alternatively, reversing below 1.1380 support will trigger a new selling force and drive the trend into correction.

GBP/USD shot up above 1.3050 resistance on Friday and settled at 1.3090 level. This week, the trend may ascend higher with possibility aimed at 1.3350 if market faces a short-squeeze. The sudden spike in Pond could come from rumor of another election as Theresa’s led Government may collapse. Support will ambush strongly at 1.3000 – 1.3050 for bargain-hunting but breaking beneath this region will reverse the market sentiment rapidly.

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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