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Japan’s Tankan Manufacturing Index Rises to 11-year High

A guest post written by DAR Wong

Currency Market Observations – 18 December 2017

Fundamental Outlook

The U.S. Federal Reserve rises 25 basis points in its benchmark rates as widely expected in market. Japan’s large manufacturers’sentiment rises to 11-year for Q4 seasons. European Central Bank and Bank of England remain unchanged in monetary policy.

The U.S. producer prices rose percent in November and maintained good growing pace. Excluding food and energy, core prices grew 0.3 percent and above forecast. Consumer prices rose 0.4 percent in November while core prices grew 0.1 percent.

The U.S. retail sales rose 0.8 percent in November while core retail sales, excluding automobiles, grew 1.0 percent. Unemployment claims dropped to 225,000 for the week ended 9 December and lowest in 8 weeks.

Federal Reserve increases benchmark rate by 25 basis points to the range of 1.25 percent to 1.5 percent. Policymakers lift the forecast for GDP estimate growth to 2.5 percent in 2018 from existing 2.1 percent.

China’s industrial production rose 6.1 percent on year basis in November. Another date on fixed asset investment also maintained at steady pace 7.1 percent on year-to-date basis.

Japan’s producer prices grew 3.5 percent on year, above forecast and beat last month data. Japan’s core machinery orders jumped 5.0 percent gains, above forecast and from previous month minus 8.1 percent.

Japan’s Tankan manufacturing index that measures huge manufacturers’sentiment rises to 11-year high in December at 25 index in the quarter ends December. Tankan services index remains unchanged for third month at 23 reading.

German ZEW economic sentiment that measures institutional and investors’confidence drops to 17.4 index in November, lowest in 3 months.

European Central Bank remains monetary policy unchanged. Analysts expect to hear from President Draghi on the tapering plan mentioned in October though he gives no comment on that.

British consumer prices rose 3.1 percent in November on year basis, highest in over 5 years’record. Retail price index expanded 3.9 percent and slid from 4.0 percent gains in October. Another report on retail sales gained 1.1 percent in November and best record in past 3 months.

U.K. average earnings of 3-month period ended October rose 2.5 percent and at 10-month best record. Unemployment rate maintained at 4.3 percent in same month. Another report on claimant for jobless benefits expanded 5,900 in November and above forecast.

Bank of England stays unchanged in the monetary policy and policymakers vow to stay hold on to asset purchase program for supporting recovery. Prime Minister Theresa may assures she will deliver BREXIT procedures on time despite bumpy road ahead, after losing the BREXIT vote in Parliament recently.

Technical Forecast

USD/JPY traded in our expected range last week. This week, we reckon the movement will be almost unchanged and entrapped within 111.00 – 113.50 region. Breaking beyond the aforementioned range needs to reinforce risk control.

EUR/USD traded in narrow range and hovered around 1.1800 region last week. Technically, the trend is still uncertain as Dollar direction is unclear. This week, we forecast the initial range will move from 1.1700 – 1.1850 region but prone to drive down towards weekend. Breaking below 1.1700 may test 1.1550 support.

GBP/USD has been behaving in whipsaw sentiment as BREXIT factors trigger much uncertainty. This week, the trend may break below 1.3300 and lower to 1.3050 area. Reversing upward will meet selling resistance at 1.3450 region.

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

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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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