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Federal Reserve Raises 25 Basis Point Rate

A guest post written by DAR Wong

Currency Market Observations – 1 October 2018

Fundamental Outlook

The US Federal Reserve hikes 25 basis points and signals another hike will come before year-end. American GDP grows 4.2 percent in improvement. The money supply slows down in Eurozone and consumer prices slide. UK is hitting a stonewall with EU negotiation on BREXIT deal and faces challenges in economic progress.

The US Conference Board of consumer confidence rose to 138.4 in September and higher than previous month. New home sale rose 629,000 in August and higher than revised 608,000 in July. Another report on pending home sale slid 1.8 percent in August and worse than expectation.

American durable goods order grew 4.5 percent and jumped higher than consensus. Excluding auto sales, core orders rose 0.1 percent and stagnated in August. Weekly jobless claims increased slightly to 214,000 for the week ended 22 September and higher than previous week.

Final GDP gained 4.2 percent in the quarter ended June. The US policymakers increase FED fund rate by 25 basis point, bringing it to 2.0 – 2,25 percent. FOMC also projects one more rate hike before year-end.

German ifo business climate on manufacturers and wholesalers’ confidence grows 103.7 in September and beat forecast. German prelim consumer prices gained 0.4 percent in August from a year ago.

The M3 money supply in eurozone increased 3.5 percent and slowest pace since December 2014. In the 19 nations, consumer prices gained 2.1 percent in September while core prices, excluding food and energies, rose 0.9 percent from a year ago.

British Government’s current account slid GBP20.3 billion in Q2 seasons and worse than consensus. Final GDP grew 0.4 percent on quarterly seasons ended June.

EU officials say BREXIT negotiation is not heading to a closing deal. UK may face many setbacks amid restriction for serving other European clients.

Technical Forecast

USD/JPY has climbed higher as Dollar firms up over US rate hike. The market closed at 113.60 region on Friday and met resistance area. In our opinion, the trend is still bullish and will probably attempt higher level this week. Range is expected to move from 112.60 – 114.60 region if the aforementioned support can be protected.

EUR/USD fell after topped out 1.1800 region and confluent with EMA200 resistance area. This week, we forecast the trend will test 1.1530 support before moving into sideways. Resistance will emerge from 1.1730 onwards with much selling interest. Risk control is recommended if the trend goes against your interest.

GBP/USD has turned into weak trend from fundamental and technical appearance. This week, we reckon the market will be resisted at 1.3250 area and head down to 1.2900 ground. The bullish factor has faded in the market and unlikely to rise beyond 1.3250 unless we see some unexpected news positive to BREXIT deal.

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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