Fundamental Outlook
US stocks fell despite being assured of low interest rates by the Federal Reserve. Stronger economic data caused worry among investors that believed this would expedite stimulus withdrawal. China showed stronger inflation amid contraction in import/export trades. Bank of England left interest rates unchanged as recovery picked up as expected.
The US consumer borrowing rose more than forecast in February. Credit advanced US$16.5 billion and exceeded forecast while non-revolving credit gained in automobiles, schools and so on. Another report on weekly jobless claims slid 32,000 to 300,000 in the week ended April 5, the least since May 2007 that signalled a pick-up in hiring.
American producer prices rose 0.5 per cent in March after declining 0.1 per cent in prior month. Core prices gained 0.6 per cent and above median forecast. The better-than-expected figures put pressure on Dow Jones benchmarks and slammed equity prices towards weekend.
Last week, the FOMC minutes revealed policymakers in assuring low interest rates as recovery will take sometimes to regain traction. Stocks were bullish during mid-week but declined Thursday and Friday after economic data showed stronger outlook than consensus.
China’s imports and exports fell in March unexpectedly as overseas shipment declined 6.6 per cent from a year ago, while imports fell 11.3 per cent. However, the trade surplus still recorded US$7.71 billion which lifted positive outlook.
Another separate report on consumer prices rose 2.4 per cent in March from a year ago after it advanced two per cent in annual rates the previous month. The producer prices was at minus 2.3 per cent annualised rate which was worse than expected.
Last week, the Ministry of Finance in China failed to sell all of the bonds offered at an auction for the first time in 10 months. Market investors speculate short-term interest rates to climb as corporate tax payments tie up funds.
Japan records surplus in current account for the first time in five months, after February rose 613 billion yen (US$5.9 billion). The yen has begun to rise slightly against the dollar as policymakers remain dormant in stimulus action. Market investors are observing the announcement of Kuroda on coming Thursday for clarifying the view of central bank.
European Central Bank and the Bank of England both agree that regulators must support and promote the asset-backed bond market. This will help to ensure the protection of financial system and will not jeopardize the use of securities.
The UK industrial production rose in February by 0.9 per cent and exceeded forecast. Another report on manufacturing output rose one per cent versus 0.3 per cent revised gains in January.
British trade deficits were reported at 9.1 billion pounds compared with 9.5 billion pounds in January. The RICS reports the housing-price gauge of property rose to 57 in March from a revised 47 the previous month.
Last week, the pound re-tested above 1.6800 highs lifted by few stronger economic data. Bank of England left interest rates unchanged to expedite recovery growth.
Technical Forecast
US dollar/Japan yen fell from 103.40 to 101.50 regions last week as market traded in waning confidence of Japan’s recovery. This week, the sentiment will be prone to Bank of Japan’s governor Kuroda’s speech thiscoming Thursday. Technically, we reckon resistance will emerge at 102.50 to 102.80 areas while downside potential may extend to 100.00 benchmarks if policymakers do not adopt any new stimulus to excite market traders.
Euro/US dollar remains well-resisted at 1.3900 levels. The market may hoveraround 1.3900 to 1.3950 regions thiscoming week before turning down. We expect the trend to draw down at 1.3800 targets if correction begins. However, abandon your short-view if the trend shoots above 1.4000 levels.
Pound/US dollar fell from 1.6820 last week. The market may be prone to test 1.6820 to 1.6850 regions in coming week before the market slides. Technically, we expect the market to decline after middle of coming week with target set at 1.6650 levels. Trade cautiously and abandon your short-view in case the bulls pierce above 1.6850 resistances.
Disclaimer: This article was written for general information only. No liability by the writer or newspapers. Dar Wong is an approved fund manager in Singapore with 25 years of trading experience in global drrivatives and forex FX markets. He can be reached at [email protected].