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Trump-Xi Summit Plans for 100-Day Trade Deal

A guest post written by DAR Wong

Currency Market Observations – 10 April 2017

Fundamental Outlook

The U.S. bombards Syria on the same day when President Trump meet Chinese leader Xi. American payroll disappoint the investors with unexpected low growth. Japan makes slow growth reflected in quarterly Tankan’s report. British Prime Minister has triggered BREXIT while central bank governor Carney calls for recognition of bank rules with European Union.

The U.S. manufacturing index compiled by ISM expanded at 57.2 in March. Construction spending rose 0.8 percent after contracted 0.4 percent in February. Another report on factory order rose 1.0 percent and in-line with forecast while the ISM services index expanded at 55.2 in March versus 57.6 in February.

The U.S. unemployment claims dropped to 234,000 in the week ended 1 April. Building permits shrank 2.5 percent in February after revised 5.8 percent gains in previous month.

Last week, FOMC minutes reveal that FED policymakers are prepared to unwind the USD45 trillion worth of bonds on central bank’s balance sheet this year, but no specific deadline in mentioned.

American non-farm payroll expanded 98,000 only in March, way below forecast and after gained at revised 219.000 in previous month. Unemployment rate stays at 4.5 percent.

The U.S. military force fired 59 missiles at Syria government airbase on Friday morning and lifted crude prices. Trump administration alleges that this is a retaliation to chemical weapons deployed by Bashar Assad regime. On the same day when President Trump meets Chinese President Xi, both leaders have agreed to a new 100-day plan for trade talks that will boost U.S. exports and reduce the United States’ trade deficit with China.

Japan’s quarterly Tankan manufacturing report rose to 12 index in Q1 and higher than 10 in Q4, however still below forecast. Consumer confidence rose to 43.9 in March and best record in more than 12 months. Another separate report on leading indicators gained 104.4 percent in February and matched forecast.

Eurozone retail sales rose 0.7 percent in February and highest in past 4 months. European Central Bank governor Draghi reaffirms that the monetary policy is appropriate and will apply till year end for seeing recovery. It is too soon to plan withdrawal of stimulus now.

Markit reports U.K. manufacturing index gained 54.2 in March versus 54.5 revised in February. Construction index expanded 52.2 in March and in-line with forecast while the services index rose 55.0 in March and highest in past 3 months.

Bank of England Governor Mark Carney proposes the Britain and the European Union to agree on recognizing common bank rules after Brexit in order to avoid financial damages. Prime Minister Theresa May mentions the importance of reaching a trade deal with the European Union that must include financial services after she triggered the BREXIT procedures for 2-year process since last week.

Technical Forecast

USD/JPY has exhibited strong support at 110.20 areas while closed at 111.00 for the weekend. This week, we forecast the trend will be firm while moving sideways initially from 110.20 – 112.20 range. Piercing above 112.20 resistance will lead a new bullish trend to 113.50 target.

EUR/USD might be heading lower this week after Draghi commented on no intention to taper stimulus too soon. We foresee the trend will be resisted at 1.0680 in case of pull-up retracement. However, there is high possibility to see the bear sinking to 1.0500 support before bargain-hunting emerges.

GBP/USD has shown a bear sign on Friday close. This week, we predict the trend will be resisted at 1.2450 while driving down to 1.2100 is possible. Dollar strengthening and gradual devaluation of Pound on BREXIT will be main reasons for lower market in this currency pair. Abandon your short-view if the trend pierces above 1.2500 level.

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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