Fundamental outlook
US trade deficit approached its highest in five years while the Dow Jones market closed at an all-time high again. China recorded a trade surplus as its economy expanded. Germany maintained a steady growth in small industrial production but large manufacturers recorded a decline.
US trade deficit in December fell 3.2 per cent to US$44.2 billion, approaching its highest since 2012. Weekly jobless claims dropped to 234,000 as at end of February 4, a 43-year low.
US prelim consumer confidence filed by University of Michigan rose to 95.7 in February. Dow Jones benchmark closed at 20,269 on Friday, maintaining its historical record high.
China’s Caixin services index grew to 53.1 in January, lower than forecast but still indicating that growth is still above 50 benchmark. The national trade surplus expanded 355 billion renminbi in January, beating forecast.
Japan’s leading indicators expanded 105.2 per cent in December, maintaining growth as expected. Core machinery orders gained 6.7 per cent in December, double the amount forecast.
Prelim machine tool orders grew 3.5 per cent in January from a year ago. Producer prices grew 0.5 per cent on an annualised rate in January.
Germany factory orders expanded 5.2 per cent in December, the best recorded in five years, reversing from minus 3.6 per cent recorded in the previous month. Industrial production, including mines and utilities, contracted three per cent after it grew 0.5 per cent in November.
British manufacturing production gained 2.1 per cent in December, the best recorded in the past eight months. Trade balance contracted 10.9 billion pounds but it was still better than forecast.
Technical forecast
US dollar/Japanese yen bounced off 111.50 bottoms and closed at 113 region for the weekend. This week, we foresee the market will thread sideways from 112.50 to 114 range but piercing above the resistance might cause the market to reach 116 target.
Euro/US dollar has shown signs of correction in prices. This week, the trend might consolidate sideways initially from 1.06 to 1.07 range. Declining beneath the support would likely result in the market declining lower to 1.05 area. The euro is rather sensitive to many commentaries about debt crisis and elections. Be wary of your risk control.
British pound/US dollar has been trading in tight uncertainty within 1.24 to 1.26 range. This week, we reckoned the news on Brexit would continue to be market’s main concern as investors observe the potential impact of the policy. Breaking beyond the aforementioned range in either direction could result in another 200 pips.
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].