Fundamental outlook
US non-farm payroll had advanced at its near largest three-year growth with jobless rate down to a six-year record low.
Trade balance had increase while in the euro area, economic progrss had slowed down. Its central bank had to implement new stimulus in early 2015. Britain had maintained its space for recovery in steadiness.
US Institute for Supply Management’s factory index saw little change at 58.7 in November and remained strong for the past three years. In a separate report, service index for October rose 59.3, which was better than the previous month at 57.1.
US jobless claims decreased to 17,000 to 297,000 in the week ended November 29 from 314,000 in the previous period. Trade gap narrowed by 0.4 per cent in October to US$43.4 billion from the previous month’s revised US$43.6 billion.
November payrolls advanced 321,000 and grew at its largest pace in almost three years. Jobless rate held at a six-year low of 5.8 per cent. Dollar strengthened after the data was released, and it pushed yen to a seven-year
low.
German factory orders rose higher than forecast in October. The orders, adjusted for seasonal swings, climbed 2.5 per cent after a revised 1.1 per cent gains in September.
In the 18-euro nations, producer prices contracted at a minus 0.4 per cent against positive gains of 0.2 per cent in the previous month. Markit Economics reported that composite Purchasing Managers Index fell to 51.1 from 52.1 in October, the lowest in 16 months. This points to an economic growth of just 0.1 per cent this quarter.
Euro area investment declined 0.2 per cent in the three months through September after a 0.6 per cent decline in the previous quarter. Gross Domestic Products increased 0.2 per cent in third quarter (3Q) and matching the forecast.
Despite Germany maintaining its economic strength, the euro bloc nations have been suffering from a slowdown that spurs the central bankers to consider new stimulus.
President Mario Draghi had pledged towards more monetary stimulus in early nest year but disappoint some investors for seeking faster action.
UK Markit Economics had reported monthly construction in Britain expanded at 59.4 and down from September 61.4.
The manufacturing purchasing manager index rose to 53.5 in November after rising at revised 53.3 in the previous month. On the other hand, service index also gained 58.6 after expanded 56.2 in September.
Halifax Ltd said UK housing values in the quarter through November rose an annual 8.2 per cent, down from 8.8 per cent in October; marking a fourth consecutive slowdown. During last week’s meeting, Bank of England left the benchmark interest rates at 0.5 per cent.
Technical forecast
US dollar/Japanese yen had climbed to a seven-year high with a receding yen value. Market surpassed 121 levels on Friday respectively to strong dollar. This week, we reckoned the market would continue to remain bullish and might reach 124 targets with little resistance on the topside. Support had begun to build at 120 regions in case of a drawdown.
Euro/US dollar has resumed weak trend with resistance emerging at 1.24 regions. The market is going to approach 1.225 as we predicted last week. Technically, we reckoned there is a high chance for the bears to drive down to 1.21 regions should the dollar rise further. Immediate resistance lies at 1.24 to 1.245 regions.
British pound/US dollar is dipping into new bearish trend once it drives below 1.56 levels. This week, we forecast the market will drive down to 1.54 regions if euro currency declines. Strong resistance which would emerge at 1.57 levels in case of upward retracement.
Disclaimer: This article was written for general information only. No liability by the writer or newspapers. DAR Wong is a registered fund manager in Singapore with 25 years of trading experience in global Derivatives & FX markets. He can be reached at [email protected].