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U.S. Withdraws from Paris Climate Treaty

A guest post written by DAR Wong

Currency Market Observations – 05 June 2017

Fundamental Outlook

The U.S. President Trump pulls out from Paris Climate Treaty and sparks unhappiness from Eurozone partners. American payroll fails to meet the forecast and reveals growth pace before expectation. Chinese Yuan surges after overnight borrowing rate hikes. Pound falls after survey shows Theresa May might not manage well on BREXIT procedures.

The U.S. personal spending rose 0.4 percent in April and highest in past 4 months. The Conference Board of consumer confidence expanded 117.9 in May and below expectation.

Another separate report on U.S pending home sales contracted 1.3 percent in April and below median forecast. ISM manufacturing index rose 54.9 in May and matched forecast. Weekly claims for the week ended 27 May was 248,000 and higher than consensus.

American non-farm payroll grew 138,000 in May but failed to meet forecast, after sliding from revised 174,000 in previous month. Unemployment rate stays at 4.3 percent.

President Trump announces withdrawal from Paris Climate Treaty after saying the unfair agreement will take away jobs from U.S. economy. He proposes to re-negotiate for new terms but has been rejected by leaders from Germany, France and Italy.

China’s manufacturing index rose 51.2 and maintained steady growth in May. Another report on Caixin’s manufacturing index rose 49.6 in May and at 11-month low record. Following the re-balance of mid-point by PBOC for Yuan value at 6.8633 against Dollar, Chinese Yuan surged against Dollar on Wednesday after overnight borrowing cost increased in Hong Kong.

Japan’s consumer spending contracted 1.4 percent in April on annual basis. Retail sales increased 3.2 percent from a year ago and best record in last 2 years. Unemployment rate remained at 2.8 percent in April on low side.

Japan’s housing starts grew 1.9 percent in April from a year ago and significantly higher from previous month 0.2 percent. Another report on prelim industrial production including mines and utilities rose and highest since March 2016.

Japan’s final manufacturing index expanded 53.1 in May and maintained good growth rate. Capital spending by businesses rose 4.5 percent ended at Q1 compared to similar period in last year.

In Eurozone, consumer prices gained 1.4 percent while core prices rose 0.9 percent, both on annualized rate but below median forecast. Unemployment rate among the 19 countries stayed high at 9.3 percent in April.

Markit reports the manufacturing index for May expanded 56.7 and matched forecast. Construction index grew 56.0 in May and highest since December 2015. Middle last week, the Pound fell after poll shows Theresa May who leads Conservative Party may lose majority seats in the forthcoming election.

Technical Forecast

USD/JPY dropped on Friday after U.S. payroll released at lower gains. This week, we target an initial range trading from 109.70 – 111.70 but prone to slide further. Breaking beneath the first support 109.70 will probably head lower to 108.00 region.

EUR/USD traded in our predicted range last week but protruded on Friday with sign of further ascension. This week, we reckon the trend will climb higher with base support laid at 1.1200 area. Reaching for 1.1400 high is possible if Dollar weakens further. Abandon your long-view if the trend sinks below 1.1200 level.

GBP/USD has been supported at 1.2770 area that sits on EMA200 line. This week, the trend is set to move from 1.2770 – 1.3070 initially while waiting to break in either direction. Stay alert towards the weekend as U.K. will hold its General Election on 8 June (London time) that will affect Pound value.

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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