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New Trade Friction Erupts Between US and China

A guest post written by DAR Wong

Currency Market Observations – 16 July 2018

Fundamental Outlook

The manufacturing inflation rises while consumer inflation flattens. China persists in inflation among manufacturers with highest trade surplus in 6 months’ record. New Trade war between US and China wobbles stock market. European economy shrinks.

The US producer prices rose 0.3 percent in June and above forecast. Excluding food and energy, core prices also grew 0.3 percent and better than expectation.

The US consumer prices rose 0.1 percent in June and missed forecast. Core prices, excluding food and energy, grew 0.2 percent and in-line with expectation.

American jobless claims for the week ended 7 July at 214,000 and lowest record in 9 weeks. The Trump administration announces a list of import tariff of USD200 billion worth on Chinese goods. Stock became volatile last week following the news on trade friction.

China’s consumer prices grew 1.9 percent in June and matched forecast. Another report on producer prices grew 4.7 percent and best record in 6 months. Trade surplus expanded USD41.6 billion in June and highest in past 6 months.

Japan’s core machinery order for May shrank 3.7 percent but still better than forecast. Producer prices grew 2.8 percent in June from a year ago and matched consensus.

German ZEW economic sentiment on institutional investors shrank to minus 24.7, making consecutive decline for 6 months and worse since 2012.

UK grew 0.3 percent in May on monthly basis. Manufacturing production rose 0.4 percent but missed expectation. Another report on trade deficit widened to GBP12.4 billion in May and worse than consensus.

Technical Forecast

USD/JPY rose last week as Dollar regained in strength. This week, the trend may climb to test 113.50 top before reversing downward. Overall momentum is rather bullish while range is prone to thread from 111.50 – 113.50 region. Risk control is advised in case of breaking beyond the range.

EUR/USD retreated last week as Dollar recovered. Market is doing a consolidation phase with sideways swings expected in coming week. Range is expected to move from 1.1550 – 1.1750 region mid mixed sentiment. Trade war initiated by US against China and Europe has caused a kneejerk to Euro and general commodity prices.

GBP/USD fell last week but the trend has stood above 1.3050 support. This week, we forecast strong bargain-hunting will ambush at 1.3050 – 1.3100 region while topside target might reach 1.3350 area. Pound is still uncertain due to Brexit complication and probably will depend on Dollar to lead the directional headway.

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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