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OPEC Maintains Steady Supply as Crude Drifts Lower

A guest post written by DAR Wong

Currency Market Observations – 1 December 2014

Fundamental Outlook

The US economy expands with growing home sales, despite jobless claims rise. Japan enjoys healthy business profits as export has been increasing this year. Eurozone stays sluggish as central bank prepares to tee up another stimulus into the new year. Crude prices fall after OPEC meeting as daily production maintains.

The US economy expanded 3.9 percent annualized rates in Q2 after gaining 3.5 percent in prior 3 months ended June. Another report by Conference Board Inc says consumer confidence, which projects the outlook for coming 6 months, declined to 88.7 from previous revised 94.1 reading.

Weekly jobless claims by Americans increased 21,000 to 313,000 for the period ended 22 November, highest since early September, from previous week 292,000. The core orders for durable goods excluding aircrafts, fell 1.3 percent last month.

American new home sales climbed 0.7 percent to 458,000 annualized pace from a revised 455,000 rate in September that was lower than initially reported. Dollar gained stronger trend as Crude prices fell due to refusal of OPEC meeting to cut oil supply.

Bank of Japan (BOJ) chief Haruhiko Kuroda urges business leaders to use profits more productively as hoarding cash in weakening yen might not be ideal. Moving towards year-end, Japanese companies are sowing their highest profits ever from the increasing exports after central bank has been increasing stimulus to boost recovery.

Japan’s core consumer prices, excluding fresh food, increased 2.9 percent in October from a year earlier. Inflation slows for a third month. Another data on household spending declined 4.0 percent in October from a year ago while industrial production increased 0.2 percent from September.

The jobless rate declined to 3.5 percent.

German business confidence unexpectedly rose for the first time in 7 months. The Ifo institute’s business climate index advanced to 104.7 in November from 103.2 in October. The preliminary inflation estimates at par growth in November after showing minus 0.3 percent in previous month.

Euro-area inflation slowed in November as consumer prices rose 0.3 percent from a year ago. Core prices, excluding food and energies, expanded 0.7 percent and matched the median forecast. European Central Bank (ECB) President Draghi reiterates on readiness to boost asset purchase program if needed, UK consumer spending rose 0.8 percent in the third quarter, the most since the second quarter of 2010. Business investment fell 0.7 percent, the first decline in more than a year, while exports dropped 0.4 percent.

Economic growth in Britain grew 0.7 percent higher than in the second quarter, unrevised from a previous estimate, and up 3 percent from a year earlier. The consumer confidence reported by GfK NOP stayed unchanged at minus 2 for November. Nationwide Building Society says housing index gained 0.3 percent after expanded 0.5 percent in October.

In OPEC meeting held in Vienna, the group took no action to ease a global oil-supply, resisting calls from Venezuela to halt the price fall. The group of countries will maintain 30 million barrels of daily production. Crude futures fell to below USD70 per barrel as weekend closed.

Technical Forecast

USD/JPY closed at 7-year high record 118.55 on weekend. This week will be tricky as the trend will be decided by Dollar strength. Technically, support will lie at 117.00 levels while the bulls will be prone to reach 119.50 regions.

EUR/USD is edging into low tides of market around 1.2450 regions. This week, we reckon the trend will stay sideways from 1.2350 – 1.2600 ranges subject to fundamental news. However, beware of piercing below 1.2350 supports in case of rising dollar strength as this may push the market trend down to 1.2250 levels.

GBP/USD sank to 1.5632 for weekend closing in bear sentiment. Technically, market is resilient at R1 – 1.5720 levels and R2 – 1.5850 levels while immediate support sits at 1.5570 levels. However, beware of rising Dollar that might push the Pound down to 1.5500 levels in coming week.

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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