Fundamental outlook
THE US market has been trading in low interest due to the short week as US celebrates its Independence Day. All eyes are on Greece as it faced the outcome of its national referendum on July 5 for its debt repayment programme. Recovery in growth on the back of better construction and services indexes, has been estimated for Britain’s economy.
US pending home sales rose 0.9 per cent in May, largely down from the revised 2.7 per cent seen in the previous month. Non-farm payroll grew 223,000 in June after it was revised at 254,000 gains in the previous month. Unemployment continued to decline to 5.3 per cent compared with 5.5 per cent in June.
Japan’s retail sales rose three per cent on an annual basis in May compared with the previous month’s revised 4.9 per cent gains. Prelim industrial output slid 2.2 per cent, worse than forecast after 1.2 per cent gains seen in April.
The Tankan’s report filed quarterly by Bank of Japan, showed large manufacturers’ index for June came in at a positive 15, which was higher than forecast. Yen threads sideways against the dollar while investors continue to have confidence in Japan’s shift out of deflation.
Eurozone consumer prices gained 0.2 per cent in June from a year ago while core prices climbed 0.8 per cent on a yearly basis. Unemployment in May remained at 11.1 per cent throughout the 19-countries region. Inflation stayed flat amid uneven growth and worries in Greece’s default issue.
On June 30, Greece missed the deadline for its 1.7 billion euros debt repayment. International Monetary Fund (IMF) has suspended all fund resources to the Greek government until the national referendum which was expected to be held yesterday (July 5). While Prime Minister Alexis Tsipras has accepted the debt restructuring deal from creditors, he has contradicted it by encouraging Greek citizens to opt for no-pay in the forthcoming referendum.
The UK economy grew by 2.9 per cent in the first three months of 2015 from the same time last year, while it grew 0.4 per cent on a quarterly basis. Current account deficit was recorded at 26.5 billion pounds after it narrowed from a revised 28.9 billion pounds.
Markit in London reported that the construction index jumped to 58.1 in June which was better than forecast. In a separate report, the services index rose to 58.5 in June, which was also higher than forecast.
Technical forecast
US dollar/Japanese yen traded in small range last week around 122.5 regions. This week, the positive outcome of Greece accepting a debt restructuring could lead to some selling in the dollar against yen or vice versa. Technically, we reckoned the trend would move from 121.5 to 123.5 regions with some price adjustments by the market traders.
Euro/US dollar is temporarily supported at 1.105 areas while the market is waiting for more affirmative fundamental factors. This week, the trend is opened to either direction based on Europe’s sentiments on Greece’s referendum. Technically, the range moved from 1.11 to 1.13 regions. However, breaking below 1.11 supports might lead bears at 1.08 levels in the event of a debt failure in Greece.
British pound/US dollar closed at 1.555 during the weekend which has become a major support. This week, the market is prone to make a rebound or break to drive lower, depending on the fundamental outcome of the dollar’s strength. We foresee a likelihood of an upward reversal at 1.575 regions. However, piercing beneath 1.552 could lead to the prices going down to 1.54 as our next lower support.
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].