Euro soars after ECB hints of possible rate hike
Fundamental outlook
THE euro surged after the European Central Bank (ECB) hinted a possibility of revisiting its interest rate policy. The US inflation slowed down during the end of last year as the dollar weakened. China stayed resilient while its trade surplus soared.
US import prices posted its smallest gain in five months by 0.1 per cent in December. US producer prices slid 0.1 per cent in December, far below the positive forecast. Core prices, excluding food and energy, also declined 0.1 per cent, entering into the negative region after four months of positive growth.
US weekly claims for jobless benefits rose to a 15-week high record at 261,000 for the week ended January 9. Consumer prices rose 0.1 per cent in December while core prices grew 0.3 per cent, an 11-month high. Retail prices rose 0.4 per cent. Core retail prices, excluding automobiles, expanded 0.4 per cent compared with November’s revised 1.3 per cent gains.
China’s consumer prices grew 1.8 per cent in December on a yearly basis. Producer prices gained 4.9 per cent from a year ago, the highest in 12 months. China’s trade surplus increased at an almost two-year high by 362 billion yuan in December.
German trade surplus increased 22.3 billion euros in November, the best recorded since April 2016. German industrial production grew 3.4 per cent in the same month.
The eurozone retail sales rose 1.5 per cent in December, higher than the previous month. The euro surged against the dollar as market traders believe the monthly stimulus of 30 billion euros starting from January will end in September, which will then be followed by a possible rate hike.
UK Halifax housing price index slid 0.6 per cent in December, contracting for first time in six months. Manufacturing production rose 0.4 per cent in November. Trade deficits widened 12.2 billion pounds, worse than forecast, compared with 11.7 billion pounds deficits in October.
Technical forecast
US dollar/Japanese yen closed below 111 on Friday. The market is expected to meet the support at 110.70 region while resistance could emerge around 112 in case of a rebound. This week, the trend remains directionless until it breaks in either direction beyond this range led by the dollar’s trend.
Euro/US dollar showed strong bullish trend as it surged at Friday’s close. This week, we forecast a possibility of a huge uptrend while sitting on the 1.2050 area. On the continual rise, the extension might reach 1.2550 in the near future. However, beware of falling beneath the 1.205 support.
British pound/US dollar saw a very strong surge on Friday as the trend reversed to a 19-month high. This week, we forecast the trend could be well supported at 1.3650 region. Upside target might be at 1.4 as we foresee an impending bull run is highly possible.
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 dar@pwforex.com.