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FOMC Reaffirms Rate Hike at Year-End Season

A guest post written by DAR Wong

Currency Market Observations – 3 August 2015

Fundamental Outlook

The U.S. orders for durable goods surge while consumer confidence slides. Japan aims to recover with weakening Yen along almost on-par inflation rise. U.K. sees steadfast recovery in housing demand and GDP.

The U.S. orders for durable goods surprises market with unexpected increment in June by 3.4 percent growth against minus 2.2 percent previously. Core orders, excluding transportation and aircrafts, rose 0.8 percent and double that of consensus.

The U.S. Conference Board reports the consumer confidence took a dip to 90.9 in July after previous month was to 99.8. Another report on pending home sales slid 1.8 percent after May data was revised at 0.6 percent growth.

In FOMC statement released by FED, Chairperson Janet Yellen stressed on no immediate rate hike but possible tightening might be seen over year-end. Dow Jones benchmarks recovered from recent fall towards weekend.

The U.S. Bureau of Economic Analysis releases its first event data on Goods Trade Balance that marks the value difference between import and export goods. Trade deficit was valued at USD62.3 billion in June. The University of Michigan reports the revised consumer sentiment in July at 93.1 before the month ended. Data was slightly below expectation.

American weekly claims for unemployment benefits for the week ended 25 July climbed slightly to 267,000 but remained in expected range. Another report on first release of advance GDP in second quarter gained 2.3 percent and better than 0.2 percent decline in previous 3-months ended March.

Japan’s retail sales gained 0.9 percent in June from a year ago, after it gained 3.0 percent on year. Consumers are observing tightly on the Yen devaluation to spike domestic growth as policymakers have pledged to expand monetary expansion.

Prelim industrial production in Japan rose 0.8 percent in June after it dipped to minus 2.1 percent. Another report on household spending dropped 0.2 percent on year and against positive forecast. Core inflation prices in Tokyo declined 0.1 percent on yearly basis after it rose 0.1 percent on year in June. Jobless rate at 3.4 percent in June.

German Ifo business climate index that measures overall confidence among investors climbed to 108.0 in July and above consensus after slight decline last month. The prelim consumer prices stayed firms at 0.2 percent growth in July after it slid 0.1 percent in prior month.

U.K. government says prelim GDP for second quarter rose 0.7 percent and matched forecast. In a separate report, mortgage approvals reported by Bank of England continues to surge in housing recovering. Loans on housing purchase in June increased to 67,000 compared to 65,000 cases in May.

Technical Forecast

USD/JPY has been trading in small range while trying hard to top above 124.00 levels. Technically, support lies at 123.00 which may open to bears if this level is violated. On hind side, climbing above 124.00 benchmarks in coming week carries potential to reach 125.00 targets.

EUR/USD traded sideways last week with no clear trend. This week, the market is prone to either direction depending on fundamental news. The range may be moved from 1.0850 – 1.1150 regions with the extreme acting as support and resistance. Breaking beyond needs to control risk.

GBP/USD is also trading around 1.5600 levels in small range. Technically, we reckon strong support at 1.5530 levels arising from EMA200 line on day-chart. If this level can be safeguarded well, the trend may challenge immediate resistance at 1.5700 and aim for 1.5800 targets.

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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