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U.K. Shows Growth after Brexit

A guest post written by DAR Wong

Currency Market Observations – 09 January 2017

Fundamental Outlook

The U.S. manufacturing and services grow despite payroll decline. China remains firm expansion as Yuan rebounds. U.K. indicates advancement in manufacturing and services after BREXIT vote but traders remain alert for coming execution.

The U.S. Institute of Supply Management releases its manufacturing index rose to 54.1 in December, consecutively gained for fourth month and best record in past 2 years. Another report on services index expanded 57.2 and same level as November.

American weekly claims for jobless benefits dropped to 235,000 for the week ended 31 December probably due to holiday seasons. FOMC minutes reveals further rate hike is possible in 2017 while market traders expect 2 more credit tightening under Trump policy.

The U.S. monthly payroll fell to 156,000 in December after reported 204,000 in prior month. Unemployment rate remains at 4.7 percent. Trade deficits widened to USD45.2 billion in November from revised USD42.4 billion in previous month.

China’s Caixin manufacturing index gained to 51.9 and better than 50.9 in November, and expansion above 50.0 benchmark. Another Caixin’s services index gained 53.4 in December and matched forecast. Last week, the USD/CNY pulled down from 6.98 to below 6.78 level due to recovering rise in Yuan currency.

Flash estimate for consumer prices in Eurozone climbed 1.1 percent in December from a year ago and better than expectation. Core prices estimate, rose 0.9 percent and best in 5-month record. Eurozone retail sales contracted 0.4 percent in November from 1.4 percent gains in October.

Markit reports the U.K. manufacturing index rose to 56.1 in December and best record in past 4 years. Another of its services index also climbed to 56.2 and best record for 1-1/2 year record, both indicate stronger growth after BREXIT vote.

Another report from Markit on U.K. construction index advanced to 54.2 in December, more than 10-year high and best record since BREXIT vote in June. Traders are cautiously watching Q1 performance as Theresa May’s government executes BREXIT policy.

Technical Forecast

USD/JPY traded in correction last week with support emerging at 115.50 region. This week, we reckon the movement will trade from 115.50 – 118.50 range while breaking beyond in either direction will lead into new headway. Observe the fundamentals in Europe economy that will lead inverse direction in USD trend.

EUR/USD is struggling to reverse or break lower as long as market trades below 1.0660 level. This week, we range the movement from 1.0350 – 1.0650 area and observe for a breakout. Technically, recovering above the 1.0650 level will progress into correction while plunging below 1.0350 support will lead into new bearish sentiment.

GBP/USD is also uncertain in trend direction as it hovers around 1.2300 region. Likewise, we would remain cautious and observe range trading from 1.2200 – 1.2550 region before trading for breakout direction. Rusk control is advised in case the market moves in adversity to your position.

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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