Fundamental outlook
US’s payroll rose, lifting Dow Jones to above 20,000 level. Federal Reserve and central banks in Japan and UK retained their monetary policies. China’s manufacturing recorded growth.
US pending homes sales were up 1.6 per cent in December from a year ago, despite an increase in mortgage loans interest. Personal spending rose 0.5 per cent after gaining 0.2 per cent in November.
The US Conference Board of consumer confidence expanded to 111.8 in January, falling from revised 113.3 recorded last month. Manufacturing index hit 56 in January, an increase of 1.5 percentage points in December. Of note, any reading above 50 benchmark could indicate growth.
Construction spending for December contracted 0.2 per cent, down from 0.9 per cent growth reported in the previous month. Fed Reserve chairwoman Janet Yellen and her policymakers retained the Fed’s monetary policy. Yellen said sentiments are improving but a rate hike is not necessary at the moment.
US jobless claims for the week ended January 28 declined to 246,000, missing consensus’ forecast. On a monthly basis, non-farm payroll rose 227,000 in January, beating expectations. Unemployment rate increased slightly to 4.8 per cent in the same month. Dow Jones benchmark closed at its best record above 20,000 since the new year started.
China’s manufacturing index rose to 51.3, above 50 benchmark for the fourth consecutive month, pointing to stable growth. China’s Caixin manufacturing index grew 51 in January, missing forecast. A reading above 50 indicates an expansion.
Japan’s retail sales rose 0.6 per cent in December from a year ago, lower than 1.7 per cent annualised rate in November. Household spending contracted 0.3 per cent in December on an annualised rate compared to minus 1.5 per cent in the previous month. Unemployment rate stayed at 3.1 per cent.
Bank of Japan retained the monetary policy but adjusted the GDP growth at 1.4 per cent for the current fiscal year. Policymakers also forecast inflation growth at two per cent for fiscal year 2018. Japan’s consumer confidence stagnated at 43.2 in January.
In the eurozone, estimated consumer prices rose 1.8 per cent in January, beating expectations. Core prices, excluding food and energy, gained 0.9 per cent. Data on prelim GDP for final quarter rose 0.5 per cent and beat consensus. Unemployment rate declined slightly to 9.6 per cent.
Final manufacturing index in the eurozone rose to 55.2 in January, retaining its strong growth. German final manufacturing index gained to 55.2, the best recorded in the last three years.
UK net lending to individuals rose 4.8 billion pounds in December, declining from the previous month. Mortgage approvals for home purchase were reported at 68,000 in December.
Markit in London reported that manufacturing index expanded to 55.9 in January, indicating growth recovery. Services index grew at 54.5, lower than the previous month and below forecast.
British construction rose to 52.2 in January. The Bank of England has kept the official bank rate at 0.25 per cent. Policymakers retained their forecast on inflation in 2017 at 2.7 per cent. UK economy has proven to be resilient after the Brexit referendum was first announced last month.
Technical forecast
US dollar/Japanese yen traded lower last week as demand in the US dollar index weakened. This week, we foresee support would emerge at 112 region and it could rebound to 114. Buying interest is expected to increase in case the trend dips below 112 level.
Euro/US dollar traded in small uptrend last week but resistance has begun to emerge in the market. This week, we reckoned the trend would take a turn and capped beneath 1.08 level. The range is expected to move downward and test 1.06 support in the near term.
British pound/US dollar capped below 1.27 level after the dollar lost its strength. This week, uncertainties would continue to engulf market while the trend might dip further to 1.23. Range trading is expected and risk control is advised in case the trend moves outside of aforementioned limit.
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].