Crude dip reflects persistent recession
Fundamental outlook US producer prices remained weak and detered expectation for a rate hike. Retail sales grew slightly while weekly jobless claims stayed high. Japan current account saw a decline and producer prices remained sluggish. European Central Bank (ECB) stressed on further easing if needed to spur growth. Crude prices slid to double bottom at US$40 per barrel.
US import prices fell 0.5 per cent and more than expected in October due to weakening crude prices and falling demand. Weekly jobless claims ended on November 7 at 276,000, above forecast.
In a speech delivered by Fed chair Janet Yellen last week, she steered away from mentioning monetary policy and reiterated that economic data needed to be supportive of further rate hike to be justifiable.
US core retail sales, excluding automobile, rose 0.2 per cent in October from minus 0.4 per cent in the previous month. Producer prices dipped below par for two consecutive months at minus 0.4 per cent in October. Manufacturing also slowed which put lid to recovery growth.
China’s industrial production stayed buoyant at 5.6 per cent growth in October from a year ago. Consumer prices expanded 1.3 per cent on an annual basis and lower than 1.6 per cent in September. In a separate report, factory gate prices contracted 5.6 per cent and remained sluggish.
Japan’s current account surplus was at 780 billion yen in October, making it the first decline in three months. Bank loans to consumers and businesses remained almost unchanged at 2.5 per cent in October from a year ago.
Japan’s core machinery orders rose 7.5 per cent in September which surprised market. In another report, producer prices contracted 3.8 per cent in October from a year ago and stayed at negative range for seven months in a row. Revised industrial production grew 1.1 per cent in September which was better than expected.
German trade surplus expanded at 19.4 billion euros in September, falling for the second consecutive month due to a slowdown in exports. In another report, consumer prices stagnated on par in October compared with the previous month. France reported a meagre one per cent growth in consumer prices for the same month.
German prelim gross domestic product (GDP) for the third quarter (3Q) is expected to expand 0.3 per cent as forecast.
In the eurozone, trade surplus among 19 countries grew 20.1 billion euros in September, better than the revised 19 billion euros in the previous month. ECB president Mario Draghi hinted of a possible monetary easing in December, which signals the sustained turnaround in core inflation had weakened.
UK claimant for jobless benefits increased by 3,300 in October compared to 500 cases in the previous month. Unemployment rate was down to 5.3 per cent in October.
On Friday’s close, US’ market saw crude prices dipped again to US$40 per barrel, revisiting the five-year low record seen in August. Recession might be exercising its whiplash if oil prices continue to drop in the coming weeks. Technical forecast
US dollar/Japanese yen stagnated above 123 levels as buyers begin to take profits. This week, we foresee the range would trade from 121.5 to 123 and prone to head downwards. Exercise control risk in case of reversing up since market analysts are still expecting new stimulus surprise from Bank of Japan.
Euro/US dollar has been trading sideways last week. Technical patterns are uncertain as market traders are waiting for firm action from ECB in December. This week, we expected the range to move from 1.065 to 1.085 regions while either direction is possible. Observe closely to fundamental news for market momentum.
British/US dollar has reached temporary support at 1.505 regions while making a small correction. Technically, we reckoned the trend would move from 1.505 to 1.54 in coming week. Ideally, we prefer to pick short entry from pull-up retracement as the major trend is heading down on strengthening dollar.
Disclaimer: This article was written for general information only. No liability by the writer or newspapers. Dar Wong is a registered fund manager in Singapore with 26 years of trading experience in global Derivatives & FX markets. He can be reached at dar@pwforex.com.