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G7 Summit Pushes for Paris Climate Deal with Trump

A guest post written by DAR Wong

Currency Market Observations – 29 May 2017

Fundamental Outlook

The U.S. President Trump visits NATO and attends G7 Summit for his first foreign visit after sworn-in to office. Moody’s downgrades China but meets rejection. Germany reports robust growth in manufacturing data. U.K. begins to slow ahead of BREXIT execution.

The U.S. new home sales expanded at 569,000 in April and lower than previous month revised at 642,000. Markit reports the manufacturing index at 52.5 in May and almost unchanged from last month.

American unemployment claims for the week ended 20 May poised at 234,000 and matched forecast. FOMC minutes released the contents of scaling down in balance sheet and preparation of rate hike possibly in June.

Another separate report on U.S. core orders for durable goods, excluding transport equipment, contracted 0.4 percent in April against a positive forecast. GDP grew 1.2 percent in Q1 and beat median forecast.

President Trump visits NATO that he rebukes the other allied members for not paying more fee on defense. On his continual trip to Italy Sicily for the G7 Summit, he stays silence to U.S. commitment on cutting greenhouse emission that he has called global warming as a “hoax” during his election campaign. European leaders are pushing hard on the Paris emission deal that was signed by Obama for an effort to protect the earth.

Moody’s downgrades China from A1 to Aa3, citing growing debts and high leveraging on borrowing in Chinese economy. Chinese government rejects the rating report and defends the status with steady growth in domestic economy.

OPEC members hold meeting and agree to reinforce supply cut until next March 2018. Market analysts expect Crude prices will rise in final quarter towards USD60 /barrel.

Japan’s trade surplus grew JPY100 billion in April and below expectation. Core consumer prices in Tokyo city rises 0.1 percent in May from a year ago and shows slight inflation growth. Another report on services producer prices grew 0.7 percent in May on annualized rate and stagnated.

German Ifo business climate survey on manufacturers, wholesalers and retailers climbs to 114.6 and highest since 2011. Markit reports the manufacturing index at 59.4, also at 6-year high record.

U.K. public sector net borrowing rose by GBP9.6 billion and highest in past 5 months, probably ascending due to spending preparation from forthcoming BREXIT procedures. GDP estimate for Q2 rose 0.2 percent and below forecast.

The business investment made by businesses and government expanded 0.6 percent in Q2 after revised at minus 0.9 percent in previous quarter ended December.

Technical Forecast

USD/JPY has been trading sideways last week. Technically, the trend is hovering from 110.50 – 112.00 region around EMA200 line while searching for new direction. We reckon there will be not much changes in coming week until we track a breakout beyond the aforementioned range.

EUR/USD temporary hits 1.1250 high and encounters profit-taking. This week, we foresee the trend will trade lower with support rising at 1.1050 level. Resistance will stay consistent at 1.1250 area for time being. Traders may adopt range trading view with risk control.

GBP/USD showed a decline on Friday after topped off 1.3040 recently. Market is expected to see support rising at 1.2750 – 1.2800 area where it closed for the weekend. Uncertainty gradually looms into Pound trend as BREXIT execution approaches. Abandon long-view if the trend slides beneath 1.2750 support.

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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