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FOMC Minutes Cements Rate Hike Soon

A guest post written by DAR Wong

Currency Market Observations – 28 November 2016

Fundamental Outlook

The U.S. housing market rises in resale property while orders for durable goods improve. FED policymakers place high bet on increasing interest rate before year-end. Japan rattles into continual slow inflation but trade surplus grow due to weakening Yen.

The U.S. existing home sales rose 5.6 million in October and consecutive rise in second month. New homes sales in October was lower at 563,000 compared to 574,000 in prior month. Another report on orders for durable goods rose 4.8 percent in October from a month earlier, the fastest pace in a year.

American weekly claims for jobless benefits rose to 251,000 for the week ended 19 November and higher than 233,000 in previous week. The FOMC minutes reveals prone decision in raising rate in December. Policymakers bet highly on rate hike before year-end as data show continuity in strengthening.

Before the Thanksgiving holiday, the Dollar Index (USDX) rose to fresh 14-year high above 102.00 and pushed against ASEAN and Emerging Market currencies into weakness.

Japan’s trade surplus grew JPY470 billion in October and showing best record in more than a year. National consumer prices declined in October for eighth straight month in annualized rate as report shows 0.4 percent contraction.

German manufacturing index expands at 54.4 while services index rises to 55.0 in current month, both signify expansion above 50.0 benchmarks. On overall 19 nations in Eurozone, the manufacturing growth maintains steady at 53.7 reading.

German final GDP for Q2 slowed to 0.2 percent growth as export slows. Another report on Ifo business climate expands at 110.4 in November and matches forecast.

British public sector net borrowing was down to GBP4.3 billion in October after the previous month was revised to 9.2 billion. U.K. second estimate for GDP in last quarter at 0.5 percent and matches expectation. Business investment on quarterly basis rose 0.9 percent as of end September and better than forecast.

Technical Forecast

USD/JPY topped 8-month high at 113.90 last week before profit-taking. This week, we foresee some drawdown will continue while the dive might head down to 110.50 regions. Observe the OPEC meeting on month end that could trigger fresh market force on uncertainty. Breaking 110.50 supports might test 107.50 bottoms while resistance stays at 114.00 levels.

EUR/USD bounced off 11-month low at 1.0516 last week and closed near to 1.0600 areas. This week, the trend may recover to 1.0750 due to short-covering. Support at 1.0500 should not be broken lest the bears will drive lower at free fall. The Dollar Index will act as strong lead factor to trigger inverse reaction in Euros.

GBP/USD has been trading neutral between the inverse trend of USD/JPY and EUR/USD markets. We predict this sideways small range will continue from 1.2300 – 1.2600 regions until the 2 aforementioned markets reach consolidation phase. Extending beyond in either direction will lead a new headway.

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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