Fundamental outlook
THE US media is still debating over the recent lower-than-expected payroll that might suppress a rate hike possibility.
However, Fed chairwoman Janet Yellen surprised the market by hinting that a tightening might be needed. China reported a slowdown in consumer inflation amid rising trade surplus, propelling a market expectations for a new stimulus.
UK reported better manufacturing production growth. The US weekly claims for jobless benefits showed 264,000 in the week ended June 4. Wholesale inventories climbed 0.6 per cent in April, higher than the revised 0.2 per cent recorded in March, indicating slower consumer demand.
Federal Reserve chair Yellen commented that a two-fold rate hike may be possible before year-end but has not hinted on a specific time frame. However, market analysts reckoned that the poor payroll in May has shaved off the high possibility of a rate tightening in June.
Crude inventories on weekly report ended June 3 declined to 3.2 million barrels in storage compared to 1.4 million barrels recorded in the previous week. This had pushed crude prices above US$50 per barrel. Nevertheless, we observed that crude demand has slowed down amid current high prices recorded in the last few weeks.
China reported that trade balance has gained 325 billion yuan in May, the highest since January. In a separate report, consumer prices gained two per cent on yearly comparison, the lowest since February. Producer prices shrank 2.8 per cent annualised rates, the lowest in 12 months. Market economist predict new stimulus might be implemented to fuel growth.
Japan’s current account surplus rose 1.63 trillion yen in April but lower than the previous month. Final GDP for first quarter grew 0.5 per cent as expected by median forecast.
Germany factory orders dropped two per cent in April, beating market expectations compared to the 2.6 per cent rise recorded in the previous month. Industrial production rose 0.8 per cent after it gained a revised 1.1 per cent in March.
The eurozone reported 0.6 per cent growth in the first quarter, the highest in the last 12 months. Debt issue and economic slowdown remained focal topics as market investors wait for more directives from the European Central Bank.
UK manufacturing production jumped 2.3 per cent in April which was better than expectation, after showing 0.1 per cent gains in March. In another report, industrial production, including mines and utilities, rose two per cent compared to 0.3 per cent gains in March.
Technical forecast
US dollar/Japanese yen traded within 106 to 108 ranges last week without a clear direction. This week, we reckoned the market might rise in short-covering while the yen weakens again. The trend might attempt 108.5 to 109 tops after the FOMC outcome. Abandon your long-view in case of a decline beneath 108 supports.
Euro/US dollar failed to climb and closed above 1.14 levels. The market has begun to wind down while supporting the strengthening dollar. This week, we predict the market would continue to slide at 1.11 to 1.115 regions, resisting at 1.14. Trade with caution if the range extends beyond this range.
British pound/US dollar fell on Friday on fear of the Brexit issue. The market might continue to slide in the coming week with target aimed at 1.4 regions. We foresee a lot of uncertainties in market towards the end of June with resistance set at 1.435 areas. Prepare for large range trading of the pound in the coming weeks.
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 27 years of trading experience in global Derivatives & FX markets. He can be reached at [email protected].