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Global Stock Markets Down in Early January

A guest post written by DAR Wong

Currency Market Observations – 11 January 2016

Fundamental Outlook

The U.S. Institute for Supply Management reports manufacturing index in December fell to 48.2 and lower than forecast. Construction spending declined 0.4 percent after gained 0.3 percent gains in November.

A second report released by Institute for Supply Managementon services index grew 55.3 in December and stayed strong above expansion limit 50.0 levels. Trade deficits shrank to USD42.4 billion in November and improved from USD44.6 billion in prior month.

The U.S. unemployment claims dropped to 277,000 in the week ended 2 January, down from 287,000 in previous week probably due to year-end seasons.

The U.S. non-farm payroll in December rose to 292,000 in December unexpectedly and above the forecast. Unemployment rate stays at 5.0 percent. Another report on wholesale inventories dropped 0.3 percent and better the median forecast, signaling rising demand in market.

On first week of January, global stock markets tumbled after Dow Jones benchmarks fell 1059 points throughout the 5 market days. Crude prices continue to sag at low edge as China economy lags behind expectation.

German trade surplus rose EUR19.7 billion in November after it gained EUR20.5 billion in previous month. Industrial production including utilities and mines dropped 0.3 percent after rose 0.5 percent in October.

Flash estimate for consumer prices in Eurozone will grow 0.2 percent in January from a year ago. Core prices estimate at 0.9 percent gains. Both are same as forecast.

In Eurozone, retail sales declined 0.3 percent in November from prior month minus 0.2 percent. Another reports shows unemployment at 10.5 percent and improved slightly from October.

U.K. manufacturing expanded at 51.9 in December but lower than 52.5 in previous month. Index reading above 50.0 levels indicates expansion. Another report on new mortgage approvals grew 70,000 in December as expected.

Markit in London reports construction index rose to 57.8 in December, highest in past 3 months. Services index grew at 55.5 in December and stays resilient in expansion.

Technical Forecast

USD/JPY has begun to flush down the prices as we predicted in December. This week, we reckon the trend may be subject to either direction. The possibility could drawdown to 116.00 before correction commences or make an upward retracement to 119.00 levels. Selling on pull-up is ideal strategy as the major bear trend has started.

EUR/USD traded sideways last week as it closed at 1.0866 for weekend. Technically, we feel uncertain to predict the trend direction though range will be bound from 1.0700 – 1.1000 regions. Stay alert for breaking away from this price constriction since it might ignite new headway thereafter.

GBP/USD has been trading in bearish sentiment as pound weakens. This week, we foresee the trend may edge lower with 1.4350 supports in view. However, beware of bargain-hunting as the prices may bounce anytime. We have identified resistance to emerge at 1.4600 regions.

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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