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MSCI Delays in Adding China A-Share

A guest post written by DAR Wong

Currency Market Observations – 13 June 2015

Fundamental Outlook

The U.S retails sales rise amid steady jobs report. China surges in trade balance but slows in producer factory gate prices that triggers speculation for more imminent stimulus. U.K. economy advances in steady pace amid domestic austerity measures.

The U.S. retail sales gained 1.2 percent in May and better than revised 0.2 percent gains in April. Excluding autos, core retail sales was up 1.0 percent after rising 0.1 percent in previous month. Jobless claims were reported at 279,000 in the week ended 6 June and almost unchanged from prior week.

The U.S. producer prices rose 0.5 percent in May and put credit tightening on higher alert, after the data showed 0.4 percent decline in April. Preliminary estimate on consumer sentiment by University of Michigan reports higher at 94.6 for the month of June.

China trade balance unexpectedly grew USD59.5 billion in May after gaining USD34.1 billion in April. Consumer inflation grew 1.2 percent in May at annualized rate and lower than forecast. Producer prices contracted 4.6 percent. Further rate cut is expected in market for stimulating economic growth.

China’s industrial output perked strong in May with 6.1 percent annual growth after it rose 5.9 percent in April. However, there was a slight sell off in Renminbi-denominated commodities and Chinese A shares after MSCI organization announced delay in adding Shanghai A shares into world emerging index.

Japan’s growth in Gross Domestic Product rose an annualized 3.9 percent in the first quarter and up 1.0 percent on quarterly basis, above the expectation. Current account balance posted its tenth straight month of surplus in April at JPY1.3 trillion (USD10.5 billion).

Consumer confidence in Japan marked at 41.4 in May and little changed from previous month 41.5. Another report on producer prices on annual rate contracted 2.1 percent in May, declining for second straight month.

Industrial output for Eurozone among 19 countries rose 0.1 percent in April after it contracted at revised 0.4 percent in March. Market traders remain wary of Greece debt repayment as signal to gauge Euro trend for the second semester.

U.K. trade deficit narrowed to GBP8.6 billion in April after the prior month was at GBP10.7 billion shortfalls. The manufacturing output dropped 0.4 percent in April after it rose 0.4 percent in March. The other major output measured by industrial production, covering mines and utilities, climbed 0.4 percent.

Austerity measures will be expected on the way as the newly formed government is restricting economic recovery. One essential topic to be observed is the decision to seek exit to European Union by the year-end.

Technical Forecast

USD/JPY corrected to 1.2250 regions last week after BOJ Kuroda commented on fair value of Yen should not be too weak. However, market has begun to climb back and hovers at 123.00 areas. This week, we reckon the trend will consolidate from 122.50 – 124.50 ranges as some traders will adjust their positions.

EUR/USD is hovering at 1.1250 regions and subject to new fundamental lead in coming week. Technically, the trend is well supported at 1.1150 levels and may ascend higher to 1.1400 again. Abandon your long view in case of unwinding below 1.1150 in case of unforeseen circumstances.

GBP/USD is well resisted beneath 1.5660 levels while market closed at 1.5550 regions for weekend. This week, we predict market has limited upside room and will start to thread sideways from 1.5450 – 1.5650 regions if long traders begin to liquidate their positions. Abandon your view in case of the trend breaking beyond the aforementioned range.

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 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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