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Mario Draghi Warns Risk from Trade Protectionism

A guest post written by DAR Wong

Currency Market Observations – 28 August 2017

Fundamental Outlook

The annual Jackson Hole meeting ends with leaders foreseeing stability in global financial system amid tight regulation. Germany repatriates the gold bullions from U.S. and France for own safekeeping. U.K. remains flat in economic growth in Q2 seasons.

The U.S. new home sales rose 571,000 in July and declined from 630,000 in June. Another separate report on American existing home sales rose 5.44 million in July and missed expectation, after 5.51 million gains in June.

Flash manufacturing index rises 52.5 in August and below forecast. Weekly claims for the week ended 19 August steadied at 234,000. Order for core durable goods grew 0.5 percent in July and matched forecast.

The U.S. President Trump vows to build a barrier wall on border of U.S. and Mexico but threatens to shut down the government if the bill fund is not granted.

In the annual Jackson Hole meeting for global leaders and financial ministers, American President Trump says he will start pushing tax reform plan this week to spur the economic growth.

Other speakers from the symposium including Federal Reserve chair Janet Yellen cites financial system is safer than 10 years ago after regulators implemented necessary actions, despite familiar risk remains in market. She refrains from commenting monetary policy and plan for reducing balance sheet.

On the same event, European Central Bank comments global economy is firming up for recovery. However, he warns of serious risk if trade protectionism rises.

German ZEW sentiment that measures the institutional investors’ confidence falls to 10-month lowest record at 10.0 reading versus 17.5 in July. Another report on Ifo business climate based on manufacturers and retail sentiment rises to 115.9 in August and in-line to forecast.

Eurozone flash manufacturing rises 57.4 in August while Germany climbs 59.4, both higher than last month. Last week, Germany Central Bank shifted 50,000 gold bars worth USD27.9 billion from New York and Paris to Frankfurt due to cold war fears.

Public sector net borrowing between spending and income of British Government fell by GBP800 million in July and better than previous month GBP5.7 billion rise.

The U.K. GDP for Q2 ended June grew 0.3 percent. Prelim business investment stayed flat in Q2 seasons after it rose 0.6 percent in Q1 ended March. Another report on financial mortgage approvals remained healthy at 41,600 in July.

Technical Forecast

USD/JPY is seen supported at 108.80 region. The market slowed down in the price movement and rebound before weekend. This week, we foresee the trend will move from 108.80 – 110.80 in tight range while resisted beneath the EMA200 line. Breaking below 108.80 might land on 108.00 area.

EUR/USD surged on Friday to 1.1925 after ECB Draghi comment. Trend is now sitting at crossroad junction that could climb higher in coming week or reverse downward. Technically, we reckon the trend is supported at 1.1800 level and needs to violate beyond here before plunging. Otherwise, scaling higher beyond 1.2000 may aim at 1.2200 target in case market short-squeezes.

GBP/USD bounced off 1.2760 ground last week. Market is likely to move into consolidation from 1.2800 – 1.3050 this week as short-covering occurs. Trend is temporarily held tight from selling as trades wait for further development in U.K. economic performance.

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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