U.S. Bombs Afghanistan and Dow Market Bludgeons
- 17 April 2017
Fundamental Outlook The U.S. inflation reflected by producer and consumer prices contract. American military action hits Afghanistan unexpectedly but hammers Dow Jones market. Japan reports higher inflation and growth in machine orders. U.K. inflation stays resilient.
The U.S. producer prices shrank 0.3 percent and first time decline after 7 months, compared to 0.3 percent gains in February. Unemployment claims improved in the week ended 8 April at 234,000 and below forecast.
American consumer prices shrank 0.3 percent in March and turned negative for first time in past 13 months. Excluding food and energy, core prices also dropped to minus 0.1 percent. Retails sales remained weak at minus 0.2 percent while core sales was flat at par.
On Friday morning in Asia, U.S. military force dropped a non-nuclear bomb on Afghanistan. Market analyst interpret it as a warning to North Korea that reaffirms the intention to conduct its sixth nuclear test. Dow Jones benchmark dropped 135 points on Friday at market close.
China’s trade surplus hit USD23.9 billion in March, higher than expectation and versus a USD9.1 billion deficit in February. Consumer prices gained 0.9 percent from a year ago and below forecast. Another separate report on producer prices maintains strong growth at 7.6 percent on annual basis and above median forecast.
Japan’s prelim machinery tool order increased 22.6 percent in March from a year ago. Core machinery order rose 1.5 percent in February after declined 3.2 percent in previous month.
Japan reports the producer prices on annual basis rose 1.5 percent and highest in past 4 months. The separate report on revised industrial production rose 3.2 percent in March and highest record in 11 months.
German ZEW sentiment on institutional investors rises to 19.5 and highest in past 10 months. Industrial production in Eurozone shrank 0.3 percent in February.
British consumer prices expanded 2.3 percent in March on year basis and stays resilient. Another report on retail price index also rose 3.1 percent from a year ago and in firm momentum.
U.K. average earning on quarterly basis ended February stayed firm at 2.3 percent gains. Claimants for jobless benefits increased 25,500 in March and higher than forecast. Unemployment remains steady at 4.7 percent.
Technical Forecast USD/JPY traded lower last week despite USDX fared stronger. Market landed at 108.50 level before weekend. This week, we foresee the trend may drive lower at 107.30 support before bargain-hunting emerges. Resistance will act upon 110.00 region in case of recovery.
EUR/USD traded in narrow range as we predicted last week. Trend appears to be bearish with resistance emerging at 1.0680 region. This week, we reckon the bear may test lower grounds at 1.0500 before short-covering emerges. We presume Euro will move as we approach French election in May.
GBP/USD indicates a neutral pattern after it has failed to pierce above 1.2600 levels. This week, we would observe the pattern for a breakout beyond 1.2600 resistance or 1.2420 support. Double possibility ambushes in market and need risk control in case of adversity against your position.
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DAR Wong is a registered fund manager in Singapore with 28 years of global trading experiences. You may reach him at firstname.lastname@example.org