US GDP down 2.2 per cent

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Fundamental outlook
THE US inflation declined due to lower crude prices and weak recovery in home sales. Growth has been revised down while Federal Reserve policymaker promised to give enough time for the market to react to a rate hike. Japan’s recovery slowed down as inflation contracted in-lieu with a high expectation in the market for another new stimulus. European region remained stagnated.

US’ existing home sales grew 4.82 million annualised rates in January after a revised annualised rate hit 5.07 million in the previous month.

In another report, Conference Board of Consumer Confidence reported that consumer confidence retreated to 96.4 in February from the previously revised 103.8 reading.

Federal Reserve chairwoman Janet Yellen had mentioned that the timetable for interest rates is flexible while employment data is not growing enough to hike rates. She promised plenty of time will be given to notify markets and there is no immediate need of rate tightening now.

US weekly applications for jobless claims rose 31,000 to a seasonally adjusted 313,000, in the week ended February 21 which was also the highest recorded in the past six weeks.

Consumer Prices fell 0.7 per cent in January, the largest decline since December 2008, after slipping 0.3 per cent in December and making it the third straight month of decline.

In a separate report, US durable goods orders jumped 2.8 per cent, which was above expectations of 1.7 per cent, reversing a sharp drop of 3.4 per cent in the December. New homes sales in US grew 481,000 in January after advancing 482,000 revised data in the previous month. Pending home sales rose 1.7 per cent in January after it contracted 1.5 per cent in the previous month.

The US gross domestic product (GDP) expanded 2.2 per cent annual pace in the final quarter, a revised decline from the 2.6 per cent pace estimated last month.

Japan’s consumer inflation eased for a sixth straight month in January. Report showed growth at 2.2 per cent from a year ago, after rising 2.5 per cent in December.

Unemployment rate surged to 3.6 per cent in January while household spending contracted 5.1 per cent from a year ago, versus minus 3.4 per cent annualised rate in December.

German Ifo business climate for February stayed at 106.8 with not much changes from the 106.7 reading in January.

Business confidence remained gloomy from the debt resurgence in the euro nations. GDP grew 0.7 per cent in the final quarter of last year, matching the forecast.

German prelim consumer inflation grew 0.9 per cent in February, which was above forecast, while import prices slid 0.8 per cent last month. Euro currency fell to below 1.12 during the weekend on weaker economic recovery outlook.

UK’s second estimate for GDP in the final quarter grew 0.5 per cent, unchanged from the previous quarter ended September. Prelim business investment fell 1.4 per cent in the final quarter, which was worst than forecast.
Technical forecast
US dollar/Japanese yen closed at 119.57 in firm sentiment for the weekend. The market has been sitting well on 118.5 supports and looks set to challenge 120 benchmarks this week.

Technically, we reckon that the range might surge to 121 targets as European currencies are prone to weaken further. Abandon your long-view if the trend falls below 118.5 levels.

Euro/US dollar dipped to close at 1.1191 on Friday. This week, we forecast the trend might deepen its fall while strong selling pressure will emerge at 1.13 regions in case of a reversal. Technically, the bears might draw down to below 1.11 and reach 1.1 grounds.

British pound/US dollar reached 1.5552 highs last week and probably has completed the bullish correction. This week, market might turn down with strong resistance emerging at 1.555 to 1.56 regions.

Technically, we expect the trend to move sideways from 1.532 to 1.555 ranges before going for another extension in the near future. Risk control is advised before the trend moves beyond the aforementioned range.
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 26 years of trading experience in global Derivatives & FX markets. He can be reached at [email protected].