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The US Payroll Boosts Stock Rise

A guest post written by DAR Wong

Currency Market Observations – 6 October 2014

Fundamental Outlook

The US surprises market by robust growth in workforce that lifts the stock sentiments. Japan indicates optimism in capital spending among big manufacturers but consumer spending remains sluggish. Britain grows in economy amid widening deficit in current account.

The US conference board of consumer confidence dropped to 86.0 in September from revised 93.4 in prior month. The US Institute for Supply Management’s index dropped to 56.6 from 59 in August, showing slowdown in factory momentum. Another service index from the same institute fell to 58.6 in September from the prior month 59.6, however holding the highest quarterly performance in Q3 average reading since the 2004.

American jobless claims slid 8,000 to 287,000 in the week ended 27 September. The monthly payrolls boosted 248,000 workers in September while unemployment rate was down to 5.9 percent at 6-year low.

Before the weekend, the US trade deficit shrank in August to its lowest level in seven months by USD40.1 billion. Dow Jones benchmarks recovered from the passive sentiment in early week and closed with 208 points gain.

Japan’s household spending declined 4.7 percent in August from a year ago, after it was down 5.9 percent in previous month. Retail sales was up 1.2 percent and better than expected. The figures have shown disparity of spending powers among citizens after the sales tax rose in April.

Japan’s Tankan report indicates capital expenditure will rise 8.6 percent through March next year. Big manufacturer sentiment index rose to 13 in September from 12 in June while non-manufacturing index slumped to 13 from 19 in June.

The Euro area flash estimate for Consumer Prices gained 0.3 percent in September on yearly basis. Core data was up 0.7 percent versus 0.9 percent gains in prior month. However, policymakers keep the benchmark rates unchanged at 0.05 percent.

European Central Bank President Mario Draghi says officials will start bond purchase program in October and asset-based securities in final quarter for at least 2 years’ duration. However, he has not mentioned the stimulus goal since he commented last month it would be near to EUR1 trillion (USD1.3 trillion).

British growth through Gross Domestic Product (GDP) rose 0.9 percent in the 3 months through June, faster than estimate. However, a separate report shows that the current account deficit widened to GBP23.1 billion from revised GBP20.5 billion in the previous 3 months.

UK manufacturing PMI grew 51.6 in September versus revised 52.2 in prior month. Markit reports the construction index rose to 64.2 in September while service index grew at 52.4, both maintained above 50.0 benchmarks for expansion.

Technical Forecast

USD/JPY topped 110.09 last week and faced profit-taking in market. This week, we foresee strong buying interest remain in market with support rising from 108.00 levels. Technically speaking, we may face some resistance at 110.70 regions but piercing above here will climb to 114.50 areas.

EUR/USD dropped to 1.2501 on Friday after Dollar index surged. This week, we reckon the market will head down again after some corrections. Resistance is seen at 1.2620 regions while doing down will aim at 1.2350 bottoms before we expect some bargain-hunting activities.

GBP/USD broke down below 1.6050 supports on Friday and closed at 1.5956 levels. This week, we expect some selling pressure will test 1.5850 regions while sideways trend is prone to occur from 1.5850 – 1.6100 ranges. Some profit-taking on short-covering might occur amid the downtrend.

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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