Tapering programme for Europe to begin after December
Fundamental outlook THE European Central Bank (ECB) has announced that a tapering programme will begin after December. US showed moderate sign of inflation while jobless claims remained steady. Spain faces separatism after Catalonia declares its intention for independence. A rate hike is expected in UK following reports of steady growth.
US orders for durable goods rose 2.2 per cent in September while core orders, excluding transport equipment, climbed 0.7 per cent. Both were above forecast.
US pending home sales stayed flat in September but it was better than the negative numbers recorded for the past two months. Weekly claims was at 233,000 in the week ended September 21. US’ GDP grew three per cent in the third quarter (3Q), beating forecast.
Tokyo core consumer prices rose 0.6 per cent from a year ago while its national consumer prices gained 0.7 per cent. Both data showed the highest recorded growth in more than two years.
Shinzo Abe led the Liberal Democratic Party to victory at Japan’s recent general election and subsequently, won control of the House of Representatives for another four-year term. The Nikkei stock index soared to a 20year high although his approval rating is still unpopular in the market.
German flash manufacturing index soared to 60.5 in October, maintaining little change from last month. Services index stayed at 55.2, above the 50 benchmark. Monthly ifo business climate covering the overall business confidence survey soared to a historical high at 116.7 in October.
In the eurozone, the manufacturing index climbed to a six-year high at 58.6 in October while services index expanded to 54.9. ECB president Mario Draghi announced a cut in the stimulus programme from the current 60 billion euros to 30 billion euros each month after December, but extended the support until September next year.
Catalonia declared independence from Spain. The Central Government has allowed Madrid to execute article 155 to remove the autonomous power of the Catalan Government. IBEX dropped two per cent after the news report. UK GDP grew 0.4 per cent in 3Q, beating forecast. Market analysts reckoned the rate hike possibility by Bank of England in November will be on track. Technical forecast US dollar/Japanese yen traded in very slowly but sentiment remained steady last week. Market is strongly resisted at 114.50 level, moving into correction this week. Technically, we reckoned the range would likely trade from 112.50 to 114.50 region while proned to heading south.
Euro/US dollar fell after mid last week as the dollar climbed. This week, we foresee the resistance could strengthen to 1.1650 while proned to sliding down further. The bears might go down to 1.1400 region as the euro weakens. Long traders should control risk cautiously.
British pound/US dollar is trading sideways as support rose to the 1.305 area. The trend might swing from 1.305 to 1.325 range this week without a directional headway. We presume the market would breakout beyond this range and it will lead to a new trend in due time. Traders are watching the Bank of England for its November meeting.
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 28 years of global trading experiences. You may reach him at dar@pwforex.com.