Fundamental outlook
THE US Department of Justice established a new counsel to investigate President Donald Trump’s ties with Russia after FBI chief James Comey was fired recently. China is poised for a steady growth while UK’s inflation surged ahead of the upcoming election poll in June.
US building permits expanded at 1.23 million in April, lower than median forecast. Housing starts also dropped to 1.17 million from the previous month’s 1.2 million.
The Energy Information Administration (EIA) reported that US Crude inventory declined by 1.8 million barrels on weekly basis, boosting oil prices. US jobless claims for the week ended May 13 dropped to 232,000, beating forecast.
US may face political risks which resulted in a kneejerk reaction on the Dow Jones market last week. The Department of Justice has appointed the former FBI director Robert Muelleras to form a special counsel to investigate alleged ties between Trump and Russia during Trump’s 2016 presidential election campaign. North Korea launched a new missile that carried heavy warhead which could reach US’ mainland and Pacific holding.
Japan and South Korea expressed security concerns over North Korea’s military expansion and called it an “intolerant act”.
China’s industrial production expanded 6.5 per cent in April from a year ago, below median forecast. Retail sales on an annualised rate remained steady at 10.7 per cent growth in April.
Japan’s core machinery orders, excluding ship and utilities, gained 1.4 per cent in March. Industrial production, contracted 1.9 per cent from February.
Japan’s prelim GDP for the first quarter (1Q) rose 0.5 per cent on a quarterly basis, beating expectations. On a year-to-year basis, the GDP contracted 0.8 per cent.
The final consumer prices in the eurozone rose 1.9 per cent on an annual basis. Core prices, excluding fresh food and energy, gained 1.2 per cent from a year ago.
UK consumer prices rose 2.7 per cent in April on an annual basis, the best recorded since September 2013. Producer prices input on raw materials purchased by manufacturers stagnated at 0.1 per cent from a year ago.
UK retail sales gained 2.3 per cent in April, the highest recorded since January 2016. UK will be heading to the nationwide election pole on June 8. Most market analysts predict Conservative Part led by Theresa May will gain a landslide victory.
Technical forecast
US dollar/Japanese yen drifted lower last week from 114 tops to 111.30 during Friday’s close. This week, we reckoned the resistance would act upon 112.30 area while the trend might be proned to fall deeper at 109.50 bottoms. Practice risk control in case of a reversal above the 112.60 level.
Euro/US dollar surged higher last week as the dollar receded. Technically, we foresee a strong selling force at 1.127 to 1.13 region in the coming week should the bulls climb higher. Support is identified at 1.11 level and buying interest is expected to line up beneath this area. Use tight risk control to trade well for the long-term.
British pound/US dollar climbed higher after responding to better data and in anticipation of positive polling results in UK. This week, we expect the bulls to ascend to 1.325 from the current region. Strong support is identified at 1.285 area in case of a drawdown. Uptrend is expected over next few weeks until the UK election poll.
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 28 years of trading experience in global Derivatives & FX markets. He can be reached at [email protected].