Fundamental outlook
THE US housing markets saw rising demand in existing homes potentially due to easier mortgage loans. Japan showed recovery in rising exports and the yen is expected to weaken further to support growth. German’s growth has slowed down and might drag the eurozone’s performance in the coming months.
US’ existing home sales hit an 18-month high at 5.19 million annualised rates in March after it was revised at 4.89 million in the previous month. New home sales tumbled in March after the sales were reported at 481,000 annualised rates, which was below consensus, compared to revised 543,000 sales in previous month.
Weekly jobless claims increased 1,000 to a seasonally adjusted 295,000 for the week ended April 18, rising for the third consecutive week. Orders for non-durable goods rose four per cent in March after it slid 1.1 per cent in February. Core orders, excluding transportation and aircrafts, declined 0.2 per cent, which was below positive forecast.
Japan posted its first trade surplus in almost three years with exports rising an annual 8.5 per cent in March. Trade surplus was reported at 229.3 billion yen, much higher than the 50 billion yen expected. Japan’s manufacturing PMI for April was at 49.7 after revised data for March rose to 50.3. Market traders expected policymakers to inject new stimulus after the Golden week holidays. This was to restart the weakening trend in yen. This will effectively give rise to exports and Nikkei stock markets.
German producer prices rose 0.1 per cent in March, below consensus’ expectations, as it lagged growth due to rising debt in the eurozone region. German ifo business climate has been progressing steadily at 108.6 in April after it was reported at 107.9, previously.
German ZEW economic sentiment dropped to 53.3 in March versus the previous month at 54.8, which was below forecast. Markit said the German manufacturing PMI dropped to 51.9 in April versus 52.8 in the previous month.
In the eurozone, manufacturing PMI was reported at 51.9 reading and below forecast. Index above 50 benchmarks indicates an expansion. Investors are still wary of Greece’s debt issues that has yet to be resolved with international lenders.
Last week, the Bank of England policymakers held a meeting and decided to retain its monetary policy. Benchmark rates are kept at 0.5 per cent while asset purchase programme stayed at 375 billion pound.
Meanwhile, British retail sales slid 0.5 per cent in March compared to 0.6 per cent gains in February, underscoring a slowdown in public demands. Investors are tuning down activities in the pound speculation in-lieu of the May election.
Technical forecast
US dollar/Japanese yen still traded at around 119 regions and has not shown a clear direction. Technically, we reckoned that the trend might fall deeper by early May in order to spur policymakers to step up a new stimulus.
This week, we forecast market will move inside 118 to 120 ranges but it is still prone to falling sentiment. It might be good to pick short entries from the pull up retracement.
Euro/US dollar has stood firm above 1.065 supports as the market closed at 1.087 regions for the weekend. This week, we reckoned the uptrend is likely to test 1.105 areas as the dollar might weaken in correction. Support has to act strong at 1.065 levels for the bulls to climb up.
British pound/US dollar has reached our predicted target at 1.515 mentioned last week. Moving forward, we reckoned that the sentiment will remain firm while support is raised to 1.497 areas now. There is a potential for the market to reach 1.54 levels this week if it does not fall back to 1.5 areas.
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].