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Greece Wins New Bailout Amid Harsh Austerity

A guest post written by DAR Wong

Currency Market Observations – 20 July 2015

Fundamental Outlook

The U.S. has slight inflation from producer prices report and jobless claims decline. FED Chair repeats her stance in rate hike sometime before year-end. Japan maintains monetary expansion at JPY80 trillion annually. Greece wins new bailout after devising newer and harsher austerity that antagonizes its citizens. British government is confident on embarking to the right recovery track.

The U.S. retail sales slip 0.3 percent in June, due to slowdown in consumer spending and weak recovery. Core sales, excluding automobiles, dropped 0.1 percent after growing 0.8 percent revised in May. Another report on factory output rose 0.3 percent in June against 0.2 percent decline in prior month.

American capacity utilization report shows 78.4 percent in resources used by manufacturing, mines and utilities etc. compared to 78.2 percent in May, reflecting slightly higher data. Producer prices rose 0.4 percent in factory gate prices in June while core prices gained 0.3 percent, both above median forecast.

American unemployed citizens who claim weekly benefits dropped to 281,000 in the week ended 11 July and better than revised 296,000 in previous week. Inflation remains stagnant after consumer prices gained 0.3 percent in June. Excluding food and energies, core prices rose 0.2 percent. Housing permits advanced 1.34 million and better than revised 1.25 million in May.

Last week, FED Chair Janet Yellen spoke in semi-annual monetary policy meeting in Washington DC and reiterated rate hike will be on track before year-end. Her reasons are backed up by increasing payrolls and steady manufacturing rise.

Japan’s revised industrial output for May was down 2.1 percent and in line with forecast. Bank of Japan (BOJ) has affirmed their monetary policy in maintaining JPY80 trillion (USD641 billion) annually for buying Japanese government bonds.

German ZEW economic sentiment that marks the investors’ confidence rose to 29.7 after it was recorded at 31.5 in June. Another report on industrial output in Eurozone slid 0.4 percent in May from previous month at par growth.

Eurozone reports consumer prices rose 0.2 percent in June on year while core prices gained 0.8 percent, both matching forecast. In the 19 countries zone using single currency, trade surplus gained EUR24.3 billion in May and improved from EUR19.9 billion revised in April.

Greece submitted new debt reform plan and accepted by Euro creditors for a new bailout total EUR86 billion. Greek people are ravaging in Athens against local government for approving harsh austerity plan.

U.K. consumer prices reports at zero growth in June from a year ago, making no progress. Core prices rose 0.8 percent on yearly basis and below forecast. Monthly claimant counts went up 7,000 in June against decline forecast and versus 1,100 drop in May. Unemployment in May was slightly higher at 5.6 percent compared to previous month. However, averaging earning index in May was up 3.2 percent from a year ago and better than 2.7 percent annual average in April.

Bank of England (BOE) Governor Mark Carney says prices are likely to pick up later this year as the global oil plunge will work itself out of the slump and inflation will return to around 2 percent target by early 2017.

Technical Forecast

USD/JPY rose to 124.00 levels on Friday after being pulled up by USDX hitting 98.00 benchmarks. Technically, we reckon the immediate resistance will emerge at 124.50 while secondary resistance lies at 126.00 areas. In case of drawdown, the support is expected to sit at 122.00 regions if Dollar corrects southward.

EUR/USD has been falling off 1.1200 tops recently and down to 1.0850 regions. We foresee bargain hunting will emerge at 1.0800 regions in coming week while secondary support lies at 1.0670 levels. Market may rebound anytime and begin sideways consolidation with resistance emerging at 1.0950 levels.

GBP/USD is taking a breather after hitting 1.5675 tops recently. The market may be trading in the range from 1.5470 – 1.5670 regions in coming weeks while waiting for clearer direction. In case of stronger Dollar, the trend is likely to pierce above 1.5670 and reach 1.5800 areas.

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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