Fundamental outlook
BRITAIN succeeded in its first round of negotiations on the Brexit, leading to the surge in pound. US saw stronger jobs rate and an interest rate hike is expected to follow through next week. China maintained its strong growth in services and trade.
US factory orders contracted 0.1 per cent in October after a revised 1.7 per cent in the previous month. Weekly claims was at 236,000, matching forecast. Institute of Supply Management reported that the services index grew 57.4 in November, lower than 60.1 recorded in
October.
On Friday, the Labor Department reported that the economy has added 228,000 jobs in November which was higher than forecast, after the October was revised to 244,000. Average hourly earnings of Americans rose 0.2 per cent from minus 0.1 per cent recorded in the previous month. The unemployment rate stayed at 4.1 per cent.
China’s Caixin services index rose 51.9 in November, the best recorded in three months. Trade surplus grew 264 billion renminbi in November, an estimated US$40.2 billion rise and the highest recorded in four months.
Consumer prices gained 1.7 per cent on an annual basis in November while producer prices grew 5.8 per cent on a yearly basis, both showed steady growth pace.
Japan’s final GDP grew 0.6 per cent in 3Q. Current surpluses rose 2.44 trillion yen in October, the highest in 10 years.
British construction index rose 53.1 in November, the highest in five months. Markit reported that the British services index expanded 53.8, down from 55.6 in October. British Halifax on home price index rose 0.5 per cent, better than 0.3 per cent in November. UK manufacturing production gained 0.1 per cent in October. Trade deficits narrowed to 10.8 billion pound, the best recorded in three months.
A divorce settlement has been reached between UK and the European Union (EU) on the final payment before the Brexit, citizens’ rights and the Irish border. Both parties are set to move on to the second round of negotiations to ensure a smooth Brexit. Pound regained its strength.
Technical forecast
US dollar/Japanese yen rose last week as the dollar gained due to expectations of a rate hike. The trend reached 113.50 before the weekend and it might attempt to reach 114 before profit-taking arises this week. We predict the support will emerge at 111.50 in case of a drawdown. Risk control is advised if the prices swing beyond the aforementioned range.
Euro/US dollar traded progressively lower last week. The trend is supported at 1.17 and it could recover to 1.19 this week. Overall, the movement is expected to thread sideways as the dollar index is still lingering from 92 to 94 range. A potential rate hike will likely be announced this week during US’ FOMC meeting and it might influence the euro’s trend as an inverse instrument.
British pound/US dollar traded slightly higher after middle last week after the successful negotiation on the Brexit procedures. The trend will likely swing sideways while prone to higher price band near to 1.355 level.
The support is firm at 1.33 to 1.332 region in case of a drawdown. Market traders are paying close attention on this pair, in-lieu of the improved situation in the Brexit negotiations.
Disclaimer: This article is written for general information only. No liability by the writer, publisher or any third party involved in the distribution of this work. Dar Wong is a registered fund manager in Singapore with 28 years of global trading experiences. You may reach him at [email protected].