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UK Grows in Confidence amid Job Rise

A guest post written by DAR Wong

Currency Market Observations – 18 August 2014

Fundamental Outlook

The US economy threads sideways while policymaker comments interest rate may rise faster than expectation. Japan stays sluggish and may slump further by year-end. Among all major economies, UK continues to strengthen with better jobs rise and annual GDP gains.

The US retail sale had zero growth in July against expected gains. Core retail sale grew 0.1 percent and down from prior month 0.4 percent gains. Weekly jobless claims ended 9 August rose to 311,000 compared to revised 290,000 in previous week.

American wholesale prices climbed 0.1 percent in July and matched median forecast. Core producer prices gained 0.2 percent. St. Louis FED President James Bullard says interest rates might rise faster than policymakers’ expectation before year-end.

Japan’s revised industrial production for June was minus 3.4 percent versus expected positive gain. Core machinery orders rose 8.8 percent in June but below media forecast. Yen has been staying firm against US Dollar though hovering at 102.00 regions.

The preliminary estimate for Gross Domestic Product (GDP) in Japan for Q2 was reported at minus 1.7 percent and in-line with expectation, probably affected by sale tax rise in the country. Bank of Japan may cut its forecast for 2014 growth to below 1.0 percent estimates from weak economic performance.

The German ZEW economic sentiment index for August surprised the market at 8.6 readings, down from prior month 27.1. The final consumer prices in July rose 0.3 percent, unchanged from June. German preliminary estimate for economic growth in Q2 went down to minus 0.2 percent compared to 0.8 percent gains in Q1.

In Euro area, flash GDP for Q2 made zero growth after rising 0.2 percent in previous quarter. Euro currency traded in weak sentiment after Germany showed slowdown then followed by stagnation in Eurozone.

British monthly claimant count in July was down to 33,600 and better than expected. Unemployment rate remained steady at 6.4 percent. Employment has been improving in UK country amid austerity measures started 3 years ago.

UK economic growth grew at unrevised 0.8 percent in Q2, at same gains made in previous 3 months ended March. The economy expanded an upwardly revised 3.2 percent from a year earlier, the most since the final quarter of 2007.

Technical Forecast

USD/JPY traded in narrow range above 102.00 levels last week. Market has been threading inside 101.00 – 103.00 ranges since April without sign of breaking beyond the band. This week, we reckon it will trade from 102.00 – 103.00 areas but sinking below 102.00 supports will move into lower band of 101.00 – 102.00 regions.

EUR/USD traded in narrow range after Germany showed economic slowdown. Market has been supported at 1.3350 while it closed at 1.3399 for the weekend. This week, we predict the market will probably climb higher to 1.3550 as we mentioned last week. However, beware of breaking below 1.3350 as this will drive the bears down to 1.3300 targets.

GBP/USD came off to 1.6657 lows last week as we expected the south trend. This week, the market may test 1.6600 before rebound to 1.6800 regions. We reckon technical recovery will arise and start to see the trend stabilizes in consolidation from 1.6600 – 1.6800 regions.

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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