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Japan Refrains from More Stimulus Triggers Disappointment

A guest post written by DAR Wong

Currency Market Observations – 03 May 2016

Fundamental Outlook

The U.S. home market lingers in low demand as orders for durable goods slide. Federal Reserve delivers no immediate necessity to rate hike despite the review might be prone to tightening in June. Bank of Japan refrains from adding new stimulus and causes Yen to rise unexpectedly against Dollar. Brexit issue triggers worries among regional leaders for prolonging the slowdown in global economy.

American new homes sales for March grew 511,000 and lower from revised 519,000 in previous month. The Conference Board of consumer confidence rose to 94.2 and down from 96.1 in March. Another report on core durable goods, excluding transport equipment, receded 0.2 percent in March and lesser than 1.3 percent plunge in previous month.

The U.S. pending homes sales grew 1.4 percent but down from revised 3.4 percent gains in February. Weekly jobless claims ended 23 April rose to 258,000 and higher than last week. Another report on advanced GDP for second quarter sinks 0.7 percent and disappointed market traders.

Weekly crude inventories remain steady at 2.0 million barrels in the week ended 23 April without much changes. Crude prices traded above 5-month high before the weekend above USD45.00 per barrel.

The U.S. personal spending climbed 0.1 percent in March and lower than previous month at 0.2 percent gains. Core personal expenses index stagnated at 0.1 percent growth without advancement.

Federal Reserve chair Yellen reiterates unchanged in interest rate policy but prone to raise moderately in coming June. On the other hand, she stresses no immediate need to increase interest since still waiting for recovery, thus giving an ambiguous comment in FOMC meeting.

Bank of Japan holds off stimulus and maintains unchanged in monetary policy at JPY80 trillion (USD715 billion) target for expanding the monetary base, mostly through bond purchases. Policymakers have postponed their time frame for reaching a 2 percent inflation target, for the fourth delay in about a year. Traders turned into disappointment after the announcement and punted USD/JPY downwards to new year-low below 107.00 levels.

Japan’s household spending dropped 5.3 percent on annualized rates in March compared to 1.4 percent gains in February, after inflation slows down. Core consumer prices in Tokyo city slides 0.3 percent in April from a year ago and stays stagnant. Another report on retail sales in March also dropped 1.1 percent from a year ago and worse than forecast.

German Ifo business climate maintains steady pace at 106.6 in April and little changed from March. Monthly retail sales slid 1.1 percent and worse than par performance in February.

Consumer prices among 19 nations in Eurozone dropped 0.1 percent in March from a year ago. However, core prices excluding energies and liquor rose 0.9 percent on annualized rates and much better than 0,1 percent in prior month.

U.K. mortgage approvals dropped slight in March at 45,100 applications compared to 45,600 in February. Debate on Brexit in coming June stirs much worries among regional leaders for the economic obstruction despite the British citizens might remain ambiguous on the vote-out.

Technical Forecast

USD/JPY dropped in despair after policymakers mentioned no further stimulus in central bank meeting. This week, market may become bearish if the recovery cannot cross higher than 108.00 levels. In such event outcome, further selling might reach down to 104.00 regions.

EUR/USD has reached resistant area at 1.1450 regions as it closed on Friday. This week, market trend may break to climb higher to 1.1700 areas if the bulls continue in Euro currency. Otherwise, sliding below 1.1380 levels could drive the prices back to 1.1150 areas.

GBP/USD hits 1.4650 resistances that has countered selling forces. Technically, market support lies at 1.4500 areas in case of draw down. Ascending higher above 1.4650 will continue to reach up for 1.4800 areas. Trade cautiously with risk control.

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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