Fundamental outlook
US housing sales remained weak while core orders climbed at a slower pace. US’ Federal Reserve might trim balance sheet sooner than expected. Japan remained trapped in a low inflation condition. Germany charted historical growth rate, based on a business climate survey.
US existing home sales grew 5.52 million in June, the lowest in four months. The US Conference Board for consumer confidence jumped to 121.1 in July, higher than the revised 117.3 in June.
New home sales grew 610,000 in June, almost flat from the previous month. Crude inventories declined by 7.2 million in the previous week, lifted by demand before weekend.
US jobless claims for the week ended July 22 steadied at 244,000, in line with forecast. Core durable goods, excluding transportation equipment, rose 0.2 per cent in June, missing forecast. Advance GDP for 2Q grew 2.6 per cent, beating forecast and making best it the best recorded in three quarters.
Federal Reserve policymakers retained interest rates this month but said the trimming of balance sheet might begin in September. Gold prices climbed after the Federal Open Market Committee (FOMC) announced that it would take no immediate action.
Japan’s core consumer prices rose 0.4 per cent in July on a yearly basis while economic growth in Tokyo expanded 0.2 per cent compared with a year ago. Retail sales grew 2.1 per cent in June on a yearly basis. Unemployment stayed health at 2.8 per cent in June.
German manufacturing index rose to 58.3 while services index expanded to 53.5 in July, both data were below forecast. Monthly Ifo business climate rose to 116 in July, making it the highest seen in German history.
UK released prelim GDP for 2Q and it predicted a 0.3 per cent growth compared to a revised 0.2 per cent in 1Q. Mortgage approvals for June was at 40,200, almost the same as forecast.
Technical forecast
US dollar/Japanese yen has been trading as we predicted last week, hovering at around the 110.50 area. It should remain supported at that level, while retaining its sideways trend sideways for the coming week. We expect the range to move from 110.50 to 112 region around the EMA200 line while waiting for more fundamental news.
Euro/US dollar has been climbing for three straight weeks, settling at 1.175 on Friday. Technically, we foresee the range has reached the EMA200 line on the weekly chart. It should encounter some selling force this week. The trend might move from 1.165 to 1.18 in a tight range until we see a reversal on the downside due to profit-taking.
British pound/US dollar has reached the resistance area at around 1.3150 level. The market trend has moved into sideways consolidation without a new trend until it breaks beyond this level. Range is expected from 1.3 to 1.32 region for the time being while traders continue to watch the Brexit progress.
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].