Weekly crude inventories increase in supply

Fundamental outlook US went through a quiet week due to the Easter season. Crude inventories grew which pressured demand in oil prices. US economy’s gross domestic product (GDP) grew amid falling corporate profits. Germany manufacturing sector’s growth remained robust. The British economy stayed flat ahead of the Brexit referendum in June.

US’ existing home sales rose 5.08 million in February which was lower than forecast, after it gained 5.47 million in January. In another report, new homes sales grew 512,000 last month after January was revised at 502,000 gains.

Weekly crude inventories increase to 9.4 million barrels, more than three times forecast, putting the lid on crude prices below US$40 per barrel. Weekly jobless claims stayed moderately high at 265,000 for the week ended March 19 after the previous week’s revised 259,000.

US core durable goods, excluding transport equipment, dropped one per cent after it was revised at 1.7 per cent gains in January. The final GDP in US economy rose 1.4 per cent which was better than expected. Corporate profits have fallen due to slow growth.

Tokyo core consumer prices slid 0.3 per cent in March from a year ago which was worse than minus 0.1 per cent recorded in the previous month. Nationwide consumer prices were unchanged from last month’s data. Investors are dubious of achieving the two per cent inflation target as outlined by policymakers many times, before.

German Ifo business climate that measures manufacturing and wholesale saw gains at 106.7 in March, the highest recorded in four-month. ZEW economic sentiment rose to 4.3 after 1.0 recorded last month.

UK consumer prices rose 0.3 per cent in February from a year ago, in line with expectations. In another report, producer prices of raw materials rose 0.1 per cent after it was revised at minus 1.1 per cent in January.

UK retail sales slid 0.4 per cent in February compared with 2.3 per cent gains in the previous month, likely due to the fall of the pound’s currency value. Investors are debating if Brexit referendum in June will lead UK to a better economy.

Technical forecast US dollar/Japanese yen pulled up last week due to short covering. Technically, we reckoned resistance would emerge at 113.6 regions while the trend might resume into bearish sentiment this week. The downside target could drive to 110.5 bottoms again if oil prices plunge.

Euro/US dollar has exhibited strong resistance at 1.33 to 1.335 regions while the market closed lower at 1.315 levels for the weekend. This week, we predict the trend would range from 1.305 to 1.335 without clear indication of its directions. Traders are advised to exercise risk control when the prices break beyond the aforementioned range.

British pound/US dollar resumed its bear trend due to loss of confidence in Brexit debate. Market is seen temporarily supported at 1.41 levels while capped under 1.45 resistances. This week, we foresee the trend would move sideways within the aforementioned range but the weakening strength in dollar might counter the bears in pound and cause uncertain consolidation.

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 27 years of trading experience in global Derivatives & FX markets. He can be reached at dar@pwforex.com