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Federal Reserve Trims Rate Hike for This Year

A guest post written by DAR Wong

Currency Market Observations – 21 March 2016

Fundamental Outlook

The U.S. core retail sales, excluding automobiles, improved to minus 0.1 percent after it contracted at minus 0.4 percent in February. Producer prices slid to minus 0.2 percent amid weak manufacturing.

American consumer prices slid 0.2 percent after stayed at par in January. Excluding fresh food and energies, core prices rose 0.3 percent and maintained in moderate growth. Housing permit grew 1.17 million in February and down from 1.20 million in previous month.

The U.S. weekly claims for jobless benefits grew moderately to 265,000 in the week ended 12 March, highest in past 3 weeks. Manufacturing index reported by Federal Reserve Bank of Philadelphia rises expectedly by 12.4 in March and best record since May 2015.

Federal Reserve releases FOMC statement saying rate hike will be expected for 2 more times until year-end instead of 4 rounds mentioned in last December. Interest rate stays unchanged as policymakers warns of low inflation in economy.

Japan’s core machinery order rose rapidly in January by 15 percent and highest since March 2014. Revised industrial production, including mines and utilities, rose 3.7 percent in January and in line with forecast. Japan’s trade surplus rose JPY170 billion in February after the prior month was revised down to JPY70 billion gains only.

Bank of Japan keeps policy unchanged and steady by maintaining JPY80 trillion monetary base annually. Deposit rate remains at negative zone while policymakers stay committed to increase inflation to 2.0 percent target.

Industrial production in Eurozone gained 2.1 percent after it was revised at minus 0.5 percent decline in December. Another report on final consumer prices rose 0.8 percent in February from a year ago and better than forecast.

European Central Bank President Mario Draghi warns European leaders that monetary policy alone would not be enough to jump-start the economy and the governments need to implement more structural reforms for recovering the economy.

British claimant count dropped 18,000 in February and down from 28,400 in previous month. Average earnings on quarter basis ended January showed moderate rise at 2.1 percent, highest in past 3 months. Unemployment rate remained steady at 5.1 percent ended in January.

Bank of England holds interest rate unchanged at 0.5 percent and all 9 committee members voted for no credit tightening. Asset purchase program also stays same at GBP375 billion while interest rate sits at 7-year record low level. Investors expect further easing after mid-year if Brexit materializes for U.K. nation.

Technical Forecast

USD/JPY dipped last week and put traders in anxiety. This week, we reckon the trend may reverse upward with resistance acting at 113.00 or induce new plunge beneath 110.70 supports. It will be difficult to gauge the bottom in case of price fall though we set target at 107.00 – 107.50 ranges, Trade with caution as market will be very volatile.

EUR/USD traded in mild bullish trend last week. Technically, market is temporary trapped from 1.1100 – 1.1350 for time being. However, beware of piercing up in case the Dollar devalues in coming week. Breaking above 1.1350 may reach up to 1.1550 areas.

GBP/USD has been trading in sideways and uncertain in directional trend. This week, we forecast range will move from 1.4300 – 1.4600 regions until we see a breakout in either way. No clue can be interpreted from the technical appearance and risk management is reminded to trade cautiously.

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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