Fundamental outlook
IN response to US’ threats to impose heavy tariffs on China’s products imported into US, China raised its import tariffs on American goods. US weekly claims grew to highest in 12 weeks. Non-farm payroll grew 103,000 below forecast which shocked market. UK recorded a slowdown in its building and services index.
The US ISM manufacturing index grew 59.3 in March, below forecast. Services index rose 58.8 in March, matching consensus’ expectations.
US weekly claims increased to 242,000 for the week ended March 31. US non-farm payroll increased 103,000 in March, surprising the market as its previous month’s non-farm payroll was at a revised 326,000. Unemployment rate was at 4.1 per cent.
China’s Caixin manufacturing index maintained its growth at 51 in March, above the 50 benchmark. Caixin services index rose 52.3 in March, the lowest recorded in four months.
China announced an increase in import tariff on 106 American products worth US$50 billion. President Donald Trump immediately responded by adding another US$100 billion tax tariff on Chinese imports. The trade war which has erupted between US and China has made many American farmers wary about their forthcoming production and sales.
Japan’s Tankan manufacturing index for 1Q rose to 24, below forecast as compared to 26 in 4Q. Consumer spending grew 0.1 per cent in February on a yearly basis, lower than the previous month.
The eurozone consumer prices gained 1.4 per cent in March on a yearly basis. Excluding food and energies, core prices grew one per cent from a year ago, below forecast.
UK manufacturing index grew 55.1 in March, in-line with expectations. Markit reported that British construction expanded at 47, which was its lowest in 20 months, signalling a slowdown in the building industry. The services index expanded to 51.7, also the lowest in 20 months.
Technical forecast
US dollar/Japanese yen traded in small recovery last week but was resisted at 107.40 area. The market might be prone to fall this week while testing the 105.50 support again. The reange is expected to be contained in the aforementioned range until the trend breaks beyond in either direction.
Euro/US dollar has been trading in a tight range from 1.2200 to 1.2330 region. The market will depend on the dollar’s strength to determine the next headway. This week, we forecast a higher probability of climbing higher to 1.2450 level, provided that the support at 1.2200 must be guarded well. Abandon your long-view if this support is compromised.
British pound/US dollar has been restricted from 1.3950 to 1.42. The support is very crucial since breaking beneath here will initiate a new selling trend. This week, we prefer to observe and adopt a cautious risk control since the trend might go in either direction.
Disclaimer: This article is written for general information only. No liability by the writer, publisher or any third party involved in the distribution of this work. Dar Wong is a registered fund manager in Singapore with 29 years of global trading experiences. You may reach him at [email protected].