Fundamental Outlook
THE US current deficits widened on a quarterly comparison but home sales maintained its growth pace. Germany kept its manufacturing in steady pace while services shrinked.
UK maintained good momentum ahead of Brexit with net borrowing reduced among public sector.
The US current deficits expanded US$117 billion in the first quarter which was worse than the revised US$114 billion contraction in the quarter ended December. Existing home sales expanded 5.62 million in May and maintained a growth pace after rising 5.56 million in April.
The American unemployment claims for the week ended June 17 was 241,000 – little changed from past weeks. Another separate report on new homes sales showed an expansion by 610,000 in May, higher than a revised 593,000 in April.
Japan’s trade surplus rose by 130 million yen in May which was lower than its revised 160 million yen the previous month. Manufacturing index expanded 52.0 in June – lower than revised 53.1 the previous month.
German producer prices shrank 0.2 per cent in May compared to 0.4 per cent gains in April. Markit reported the German manufacturing index rising to 59.3 in June and maintained good pace. Services index slid backward to 53.7 which marked its worst in the past five months.
The UK public sector’s net borrowing dropped to six billion pounds in May compared to 8.7 billion pounds the previous month. Industrial order expectation unexpectedly jumped to index 16 which was almost twice the forecast in June.
Technical Forecast
US dollar/Japanese yen tested the resistance at 111.60 area as predicted last week. This week, we reckon the trend will be prone to slide and re-test 109.50 support. However, beware of the bulls that could charge above 112.00 levels that might climb higher to 113.50 for short-squeezing sellers.
Euro/US dollar is still trapped within the range from 1.1100 – 1.1250 region in mixed sentiment. The trend needs to breaks beyond this range in either direction in order to lead a headway. There is no clue of predicting the direction though we observe the week-chart may favor the downtrend on more probability.
Pound/US dollar is trading in mixed sideways after it bounces off recently from 1.2600 bottoms. However, we expect strong resistance will emerge at 1.2800 area and might reverse the bulls again in near future. Risk control should be set at 1.2850 region for seller in case of unexpected rise.
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].