US’ new home sales firm up

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Fundamental outlook

US GDP grew at a slower pace but new home sales recorded a healthy rise from the previous month while jobless claims also saw an increase. Japan’s housing starts increased, amid improved consumer prices. Germany, as the largest economy in the eurozone, recorded a slowdown in its economic growth, causing investors to worry about its performance and its impact on other economies.

US new home sales rose 689,000 in May, higher than the previous month. Conference Board of consumer confidence grew 126.4 in June, lower than forecast, after May expanded at a revised 128.8.

US durable goods declined 0.6 per cent in May, improving from minus 1.6 per cent revised in April. Excluding transportation, core durable goods dropped 0.3 per cent, making it the first decline in four months. The final GDP for 1Q rose two per cent, missing forecast.

US jobless claims climbed to 227,000 in the week ended June 23, higher than the previous week. Personal income stayed flat at 0.4 per cent in May while consumer spending grew 0.2 per cent, below expectations.

Japan’s core consumer prices climbed 0.5 per cent in June on a yearly basis and in-line with May’s data. Retail sales rose 0.6 per cent in May on a yearly basis, the lowest recorded in seven months.

Japan’s housing starts rose 1.3 per cent in May from a year ago, exceeding forecast. Tokyo core consumer prices expanded 0.7 per cent in June, the highest in three months.

German ifo business climate grew 101.8 in June, dropping for the fifth consecutive month. Prelim consumer prices missed forecast and grew 0.1 per cent, the lowest in five months. Retail sales declined 2.1 per cent in May against positive forecast, after registering 1.6 per cent growth in April.

British current account deficits narrowed to 17.7 billion pounds in April from 19.5 billion pounds in the previous month. Final GDP grew 0.2 per cent in 1Q, performing better than consensus’ expectations.

 

Technical forecast

US dollar/Japanese yen climbed higher last week after testing the support at 109.50. This week, we foresee the market might test the 111.50 resistance level before moving back into consolidation. Range bound trading is expected but breaking beyond the aforementioned range calls for proper risk control if the trend is an adversity to your position.

Euro/US dollar has shown firm support at 1.1530. This week, we reckoned the trend might recover after past weeks of weak sentiments. The range is projected to reach 1.1830 in case of a continuation of short-coverings in market. Caution is advised if the trend whipsaws without a clear direction.

British pound/US dollar staged a rebound on Friday from its 1.3050 bottom. The market is expected to climb higher in the coming week in-line with the euro’s performance. Technically, we predict the resistance will emerge at 1.3350 region in case of a recovery. The signal of recovery in the euro and the pound may indicate that the dollar could recede in the near future.

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].