Japan sees inflation slowing down

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Fundamental outlook

 

THE US’ new home sales showed recovery while consumer inflation gained in mild sentiment. Fed chairwoman Janet Yellen reiterated that the rate hike would only be implemented later this year. Japan’s consumer inflation saw a slow down amid more expectations by the public for a stimuli. Uncertainties surround UK’s uneven economic recovery.

US existing home sales grew 4.88 million in February from a year ago, which was below forecast. In another report, new home sales rose 539,000 from a year ago after it was revised at 500,000 annualised gains in January. Consumer prices grew by 0.2 per cent after contracting 0.7 per cent in January. Excluding food and energies, core prices also rose by 0.2 per cent, which was higher than forecast.

US orders for durable goods pulled down Dow Jones benchmarks after it saw a decline in February.

The orders dropped 1.4 per cent against positive forecast. Core orders, excluding transport equipment, also slid 0.4 per cent, on par with growth seen in the previous month.

US jobless claims improved in the week ended March 21 by lowering to 282,000 after it was reported at 291,000 in the previous week. The final release of US’ gross domestic product (GDP) in a quarterly report ended in December saw GDP advancing 2.2 per cent which was below forecast.

University of Michigan reported that the revised consumer sentiment grew to 93 in March after 91.2 in the previous month.

Before the weekend, Fed chairwoman Yellen said a rate increase will not be immediate for now although credit tightening might be warranted later this year. She added that an increase in core inflation is not essential before the Fed raises rates. Stocks firmed up and saw a small recovery following her remarks.

Japan’s consumer inflation grew two per cent in March on an annual basis but it has been slowing down for a straight seven months. Unemployment rate stayed unchanged at 3.5 per cent in February. In another report, retail sales contracted 1.8 per cent from a year ago, making this the fourth straight month of slowdown.

Markit reported that the German manufacturing index gained 52.4 in March, which was higher than the previous month’s 51.1 reading. French manufacturing expanded at 48.2, after it rose 47.6 in February. In a separate report, German Ifo business climate expanded to 107.9 in March after it gained to 106.8 in the previous month.

UK consumer prices grew the same pace as in February from a year ago after it made 0.3 per cent annualised gains in the previous month. Core prices rose 1.2 per cent annualised rates, which was below forecast. Retail sales jumped 0.8 per cent in February after it progressed 0.1 per cent gains previously.

UK Nationwide Building Society said housing price index was backed up by mortgages which expanded by 0.1 per cent in March, better than minus 0.1 per cent in the previous month.

Technical forecast

 

US dollar/Japanese yen began to lose momentum below 120 after the yen appreciated. Market is still within our expected range projected last week.

Moving forward, we foresee the trend will trade from 118 to 120 regions while waiting for fundamental leads. Beware of breaking beneath 118 that may drive down to 117 as lower supports.

Euro/US dollar has been trading sideways from 1.075 to 1.105 ranges.

This will likely continue this week. However, the trend is still uncertain. Until then, we see it extending beyond the aforementioned range. Going above 1.105 resistances will lead to 1.115 targets.

British pound/US dollar traded from 1.48 to 1.5 ranges last week amid sideways trend. This week, we foresee that the bulls are prone to rise higher to 1.515 levels once it penetrates above 1.5 resistances.

However, we need to observe the 1.48 as firm support that should not be violated throughout the coming week.

 

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].