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Japan Cuts Growth Forecast in 2015

A guest post written by DAR Wong

Currency Market Observations – 04 May 2015

Fundamental Outlook

The US economy remains unsteady in recovery while policymakers have held to key rates unchanged. Japan slows down in retail sales and stagnates in industrial production. Eurozone releases first estimate for consumer prices at fatigue and U.K. also has rattled growth in first quarter.

The US service sector cooled down in April as Markit reports the index slipped to 57.8 from revised 59.2 in March. The Conference Board’s Consumer Confidence reached 95.2 in April, below forecast and after the March reading was revised at 101.4.

Growth for first quarter in US economy rose 0.2 percent reflecting weaker consumer demand. Pending home sales gained 1.1 percent in March and much lower than the growth revised at 3.6 percent in previous month. In a separate report, the weekly jobless claims dropped to 262,000 as of 23 April and hit lowest record since 2000.

Consumer spending rose 0.4 percent in March and stronger than 0.4 previous month finalized at 0.2 percent gains. The Institute for Supply Management (ISM) reports the manufacturing index at 51.5 in April, below the forecast but remaining unchanged as previous month.

In FOMC meeting, policymakers have implied that rate hike will be unlikely in before June. FED fund rate is still anchored near zero since late 2008 after the financial crisis.

Japan’s retail sales plunged 9.7 percent in March and worst than forecast. Industrial output fell 0.3 percent in March and better than forecast of supposed deeper decline. The national core consumer price index rose 2.2 percent in March from a year earlier. Unemployment rate went down to 3.4 percent from 3.5 percent in February.

Japan’s central bank has held interest rate unchanged but cut its economic forecast in 2015. Forecast for core consumer price index (CPI) has been cut to 0.8 percent for fiscal year 2015 from its 1.0 percent projection in January. GDP growth is also cut to 2.0 percent from the 2.1 percent it projected in January.

In Eurozone, core consumer prices for April was estimated at 0.6 percent growth while jobless rate remained same at 11.3 percent in March.

UK growth measured by Gross Domestic Product (GDP) has slowed down faster than expected in Q1 after it was up 0.3 percent on quarterly basis. British Bankers’ Association says the new mortgage approvals recorded at 38,800 cases and higher than 37,500 in previous month.

Markit in London says the manufacturing index in U.K. slid to 51.9 in April, down from revised 54.0 reading in March and also below forecast.

Technical Forecast

USD/JPY climbed higher on Friday amid weaker Yen. Expectation of new stimulus prevails in market. The trend has proven strong support at 118.30 regions and closed at 120.00 areas for weekend. This week, we reckon the rise will test 121.00 resistances while still consolidate inside the range of 118.00 – 121.00 regions.

EUR/USD began to fizzle out on Friday after reaching 2-month high at 1.1290 levels. This week, we foresee the trend may take a correction at 1.1050 supports while consolidating for another marginal high. Market is still in short-covering sentiment amid weaker Dollar Index, hence supporting some demands to buy Euro.

GBP/USD reached our predicted tops and fell off 1.5490 highs to close at 1.5130 on Friday. The market will now move into sideways consolidation for 1-2 weeks before leading into new direction again. Technically, we recon the bears may drive down at 1.4950 supports in coming week while reversing up could reach 1.5400 levels again. Trade cautiously and beware of swings.

Dar Wong

This post is contributed by OPF Guest Blogger, DAR Wong.

DAR Wong is an approved fund manager in Singapore with 25 years of global trading experiences. You may reach him at

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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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