Overall economic sentiments down
Fundamental outlook
US housing growth slipped while jobless claims improved slightly. China grew at its slowest pace for its fixed asset investment in non-rural sectors. UK’s earnings declined while claims for jobless benefits increased.
US retail sales gained 0.3 per cent in April, down from a revised 0.8 per cent in March. Excluding automobiles, core prices also grew 0.3 per cent but below expectations.
US building permit expanded 1.35 million in April compared with a revised 1.38 million in the previous month. Housing starts rose 1.29 million, falling below forecast.
Industrial production including utilities and mines grew 0.7 per cent after it rose 0.6 per cent in March. Jobless claims were at 222,000 during the week ended May 12. This was the best recorded in four weeks.
China’s industrial production rose seven per cent in April from a year ago, higher than the previous month. Fixed asset investment gained seven per cent on a yearly basis, the lowest recorded.
Japan’s producer prices rose 0.2 per cent in April from a year ago, matching forecast. Preliminary GDP for the first quarter (1Q) contracted 0.2 per cent, missing forecast. Revised industrial production grew 1.4 per cent in March, the highest in three months.
German preliminary GDP for 1Q seasons grew 0.3 per cent, lower than forecast. ZEW sentiment report on institutional investors declined to minus 8.2 in May and stayed sluggish.
Flash GDP for the eurozone rose 0.4 per cent in 1Q. Final consumer prices in April grew 1.2 per cent from a year ago. Core prices rose 0.7 per cent on an annual basis.
The averaging earnings of UK citizens grew 2.6 per cent on a quarterly basis ended March, the lowest recorded in three months. Claimant counts for jobless benefits increased to 31,200 in April and twice higher than forecast. Unemployment rate stayed at 4.2 per cent. Technical forecast US dollar/Japanese yen advanced last week but stayed resisted at 111. This week, we reckoned the trend will encounter strong bears at 111 to 111.50, depending on the direction of the dollar Index USDX. Tight range is expected since support is set at 110 unless the trend pierces beyond either direction.
Euro/US dollar almost reached the support at 1.1750 region as it closed on Friday. The market is constricted to 1.1750 to 1.1900, in case there is a recovery this week.
The sentiments is starting to become mixed and traders are observing the dollar Index (USDX) to decide the potential market movement of the euro now.
British pound/US dollar selling trend is slowing down as the market approaches the 1.3450 area.
Technically speaking, the market is prone to make a rebound at 1.3750 level in case of short-covering among traders. Although we foresee the range could be temporary from 1.3450 to 1.3750, risk control must be managed if the bears go below the 1.3450 level.
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.