US payroll falls short of expectations
Fundamental outlook
US payroll fell during the year-end season, likely due to the holiday period. However, US manufacturing stayed on its strong growth track. China’s manufacturing and services sector soared. UK’s manufacturing declined but its services and consumer borrowings strengthened.
The US ISM manufacturing index rose to 59.6 in December, the highest in three months. Weekly unemployment claims grew to a 13-week high at 250,000 for the week ended December 30.
US payrolls rose by 148,000, falling short of the market’s expectations while the unemployment rate stayed at 4.1 per cent. Trade deficits expanded to more than a six-year high at US$50.5 billion in December.
Based on data by Caixin, China’s manufacturing index climbed to 51.5 in December, retaining its strong growth. The services index continued to soar to a three-year high at 53.9 from November.
The eurozone consumer prices grew 1.4 per cent in December on a yearly basis while core prices gained 0.9 per cent. German retail sales gained 2.3 per cent on a monthly basis in December, the best recorded since October 2016.
UK manufacturing index expanded 56.3 in December, lower than the previous month. Markit reported that UK’s manufacturing index grew 52.2, a decline from November’s 53.1 reading.
UK services index grew higher at 54.2 in December, rising from November’s 53.8 index. Net lending to consumers rose 4.9 billion pounds, higher than the revised 4.7 billion pounds.
Technical forecast
US dollar/Japanese yen was supported at 112 during the year end season. This week, we reckoned the trend would range from 112 to 113.60 while waiting to break in either direction. The dollar’s strength will be essential as the deciding factor to the market’s trend.
Euro/US dollar has been rising due to the weakening dollar for the past few weeks. Resistance is seen at 1.21 area while the market might move lower this week. We forecast the range will move from 119 to 121 before taking a new direction. Risk control is advised once the trend extends beyond the aforementioned range.
British pound/US dollar is trading near to the current top at around 1.36. This week, we predict the trend would move into a small correction with support emerging at 1.345. However, the trend might move unexpectedly and pierce above the 1.36 resistance.
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.