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Global Stock Indexes Whipsaw in Volatility

A guest post written by DAR Wong

Currency Market Observations – 31 August 2015

Fundamental Outlook

The U.S. economy shows recovery in housing market while consumer confidence jumps in optimism. Orders for core durable goods improved on monthly basis and jobless claims reduce. Japan stagnates in recovery though unemployment declines. U.K. advances in mortgage approvals for housing loans while business investment climbs.

The U.S. new home sales performed better in July at 507,000 compared to 481,000 revised in June. The Conference Board’s consumer confidence surprised market by jumping to 101.5, best record since August 2007, after it showed 91.0 in July.

American orders for durable goods, made to last for more than 3 years, rose 2.0 percent in July after it gained at revised 4.1 percent in previous month. Orders for core durable goods, excluding transport equipment, climb 0.6 percent and doubled the expectation.

Weekly jobless claims in U.S. job markets steadied at 271,000 in the week ended 22 August and better than previous week at 277,000 cases. Another report on prelim GDP for Q2 grew 3.7 percent and higher than median forecast. Pending home sales rose 0.5 percent after it slumped 1.7 percent in June.

The U.S. trade balance for general goods reflected USD59.1 billion deficits in July. University of Michigan reports the monthly consumer sentiment at 91.9 in August and lesser than expectation.

Dow Jones benchmarks slid more than 1000 points on last Monday and triggered global fall-off in stock indexes. All markets recovered after mid-week and closed around open prices with whipsaw technical patterns.

Japan’s household spending dropped 0.2 percent in July from a year ago against an expected rise. Core prices in consumer inflation stagnate at par in August on yearly basis while core inflation in Tokyo city declines 0.1 percent on year. Unemployment rate in July went down to 3.3 percent and better than previous month 3.4 percent.

German Ifo Business climate index that measures investors’ confidence reveals gains at 108.3 in August while previous month grew at 108.0 reading. The finalized report for growth in Q2 for Germany grew 0.4 percent and stay in line with median forecast.

U.K. mortgage approvals maintained steady growth in July at 46,000 after it as revised at 44,800 cases in July. The prelim estimate for business investment grew 2.9 percent in Q2 and higher than previous quarter at 2.0 percent gains. The second estimate for Q2 GDP maintains unchanged at 0.7 percent growth.

Technical Forecast

USD/JPY dipped to 116.26 last week but quickly recovered to above 121.00 levels before weekend. The unexpected decline came from the sudden meltdown of Dow Jones markets with regional indexes. This week, we reckon the market will trade sideways in uncertainty from 118.50 – 122.50 regions subject to Dollar strength. Risk control should be reinforced to safeguard profits.

EUR/USD reached 1.1712 highs and receded rapidly to 1.1200 regions before weekend. Buying interest is expected to support at 1.1150 regions for coming week while market might hover in the range below 1.1320 resistances. Sideway trend will be expected inside this range until it breaks out in either direction.

GBP/USD weakened last week but still supported at 1.5300 areas. This week, we predict the range will trade from 1.5300 – 1.5500 ranges in tight band. No clue for the eventual direction but we suggest follow the fundamental news of U.K. economic data.

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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