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Japan’s Nikkei Prices affected by Tankan Report Fall

A guest post written by DAR Wong

Currency Market Observations – 04 April 2016

Fundamental Outlook

The U.S. nonfarm payroll slides from previous month while Dollar stays weak. Consumer confidence and manufacturing index climb amid housing weakness. Japan’s large manufacturers cut down investment as growth slows down. U.K. records rising current account deficits as economic recovery delays.

The U.S. pending home sales rose 3.5 percent in February from previous month revised at minus 3.0 percent, probably due to fear of imminent rate hike for this year. Another date shows personal income rose 0.2 percent while personal spending stays flat at 0.1 percent.

The U.S. Conference Board of consumer confidence rises to 96.2 in March and higher than expectation. Weekly jobless claims rose to 276,000 in the week ended 26 March, highest in 4-week averages.

On Friday, American non-farm payroll rose 215,000 in March and above forecast, after it was revised at 245,000 in previous month. Unemployment rate shows 5.0 percent in March.

The Institute of Supply Management reports manufacturing index at 51.8 for April and higher than 49.8 in last month. Dollar poises for weakness against most major currencies and lends a hand for bargain-hunting to precious metals as safe haven.

Caixin manufacturing index in China grows to 49.7 in April while the government report shows similar report at 50.2 gains. Shanghai stock market progresses in steady sentiment while Shanghai Composite Index closed slightly above 3000 benchmarks on Friday.

Japan’s household spending rose 1.2 percent in February from a year ago and above forecast. Annualized retail sales climbed 0.2 percent but less than expected. Jobless rate stagnated at 3.3 percent in February.

Japan’s prelim industrial production including mines and utilities contracted 6.2 percent and worse than forecast, after it rose 3.7 percent in January. Another report on housing starts rose 7.8 percent in March form a year ago.

Japan’s Tankan report on large manufacturers’ investment dropped to 6.0 in Q1 after it showed 12 index in final quarter. Nikkei declined almost 600 points after the data released and investors’ confidence are waning in stock market.

German prelim report on consumer prices expanded 0.8 percent in March while waiting for actual data to be released next month. On separate basis, German manufacturing rose 50.6 while French manufacturing index rose 49.6 as expected. The final manufacturing index for Eurozone was up at 51.6 in April.

U.K. final GDP for the quarter ended December rose 0.6 percent while current account shows record deficits at GBP32.7 billion. Mortgage approvals on monthly basis remains steady at 74,000 in February. Markit reports the manufacturing index for U.K. climbed to 51.0 in April, which indicates expansion above 50.0 readings.

Technical Forecast

USD/JPY fell last week as Yen strengthened. Waning confidence in Abenomics also puts lid on market demand as trend weakens. This week, we reckon resistance will emerge at 112.60 in case of short-covering. However, the downside potential may be open to 110.50 regions.

EUR/USD has been rising last week and closed at 1.1380 resistances for the weekend. This week, we predict the support will emerge at 1.1300 – 1.1330 regions and likely to drive the prices higher at 1.1600 regions. Trade cautiously while the Dollar weakness will help to push Euro higher in near future.

GBP/USD traded sideways as demand has been moving out gradually of market. This week, resistance has been spotted at 1.4300 areas and prices drop is more likely to occur while immediate support lies at 1.4050 areas. Beware of price decline beneath 1.4050 as this might lead to new selling forces in market.

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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