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U.S. Payroll Rises and Lifts Dollar

A guest post written by DAR Wong

Currency Market Observations – 10 July 2017

Fundamental Outlook

The U.S payroll rises in optimism and spikes Dollar. Japan reaches a new trade deal with European Union that aims to begin in early 2019. U.K. housing prices decline in situation of BREXIT begins.

The U.S. Institute of Supply Management reports the manufacturing index at 57.8, highest since November 2013. Construction spending stayed flat in June but improved from negative numbers for past 2 months.

The U.S. factory orders for May contracted 0.8 percent and worst in past 6 months. Jobless claims rose for third straight week at 248,000 ended 1 July. Institute for Supply Management’s services index rose to 57.4 in June and maintained growth.

American non-farm payroll grew 222,000 in June and higher than forecast. Unemployment rate at 4.4 percent and above consensus. Dollar gained after the data release on expectation of inflation that might trigger one more rate hike before year-end.

China’s Caixin manufacturing index rose to 50.4 in June and regained expansion above 50.0 benchmark. Another report on services index poised at 51.6 but lower than 52.8 in May.

Japan’s quarterly Tankan report on large manufacturers ended June rose to 17 and highest in past 3 years. Tankan’s services index keeps strong pace at 23 for the same quarter compared to 20 in the quarter ended December.

European retail sales grew 0.4 percent in May and matched consensus. Another report on services index rose 55.4 in June and stayed in growth pace.

European Union (EU) and Japan have reached an agreement on bilateral trade deal, after 4 years and 18 rounds of negotiations. The agreement aims to take off in early 2019 with big tariff cuts, co-operation on standards and regulations and the opening up of public procurement markets. The EU estimates the accord will save it EUR1 billion in customs duties per year and boost exports to Japan from current EUR80 billion odd to more than EUR100 billion a year.

Markit reports the U.K. manufacturing index rose to 54.3 in June and lower than 56.3 in previous month. Another report on construction index rose to 54.8 in June and matched forecast for good growth. The services index rose to 53.4 in June and matched forecast.

U.K. construction index shrank 0.2 percent in May and worse than previous month. Halifax housing prices dropped 1.0 percent against 0.3 percent gains in May. Analysts reckon the property decline could be due to impact of BREXIT.

Technical Forecast

USD/JPY has shown firm support at 112.50 area last week. Market is prone to ascend further with target aimed at 115.00 in coming week. Trend is still bullish due to strong payroll on Friday and might continue for few more days. Risk control for long traders should be set at 112.50 level in case of drawdown.

EUR/USD has fizzled out from recent top 1.1450 region and begins to consolidate sideways. This week, we reckon the market will thread sideways from 1.1250 – 1.1450 range while Dollar strengthens mildly. Swing trading is preferred with risk management properly exercised.

GBP/USD has topped off 1.3050 as we predicted last week. The trend is prone to drawdown from now onward while selling pressure continues to build up. This week, we foresee the bear might drive down to 1.2700 level if the upside is intact at 1.2970 resistance. Stay tune for more bearish sentiment in coming months if the trend could not cross above 1.3000 benchmark anymore.

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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