Forex Market: USD/HKD trading forecast for Monday

Friday’s trade saw USD/HKD within the range of 7.7519-7.7557. The pair closed at 7.7549, gaining 0.03% on a daily basis, while losing 0.04% for the whole week.

Fundamentals

United States

Manufacturing PMI by Markit – final estimate

The final estimate of the Manufacturing Purchasing Managers Index probably confirmed the preliminary reading of 54.7 in November, reported on November 20th. If confirmed, this would be the lowest PMI reading since January, when the final gauge was reported at 53.7. In October the final seasonally adjusted PMI stood at 55.9. According to preliminary data by Markit, weaker rates of output and new business growth were the main negative influences on the headline PMI figure in November. Latest data pointed to the slowest expansion of manufacturing production for ten months, with a number of survey respondents citing less favourable demand conditions.

“Incoming new work also increased at the weakest pace since January, partly reflecting a reversal in export sales volumes. Although only modest, the rate of decline in new orders from abroad was the most marked for 17 months. Some survey respondents commented on the strengthening dollar exchange rate, as well as more subdued underlying export market business conditions.”, Markit stated.

Values above the key level of 50.0 indicate optimism (expanding activity). Lower-than-expected PMI readings would cause a bearish impact on the US dollar. The preliminary data by Markit Economics is due out at 14:45 GMT on Monday.

ISM Manufacturing data

Activity in United States’ manufacturing sector probably slowed down in November, with the corresponding manufacturing PMI coming in at a reading of 58.0, according to expectations, from 59.0 in October. Last month new orders increased sharply and employment rose for the sixteenth consecutive month. The New Orders Index was reported at 65.8 in October, an increase from a reading of 60.0 in September, indicating growth in new orders for the 17th consecutive month. The Employment Index climbed to 55.5, from a reading of 54.6 in September.

The Manufacturing Purchasing Managers’ Index (PMI) is a compound index, which represents manufacturing activity in 18 different industries. It is comprised by four equally-weighted components: seasonally adjusted employment, seasonally adjusted production inventories, seasonally adjusted new orders and supplier deliveries. The index is based on a survey of 300 purchasing managers.

Participants can either respond with “better”, “same”, or “worse” to the questions about the industry, in which they operate. The resulting PMI value is measured from 0 to 100. If the index shows a value of 100.0, this means that 100% of the respondents reported an improvement in conditions. If the index shows a value of 0, this means that 100% or the respondents reported a deterioration in conditions. If 100% of the respondents saw no change in conditions, the index will show a reading of 50.0. Therefore, readings above the key level of 50.0 are indicative of expanding activity in the sector of manufacturing. In case the PMI slowed down more than anticipated, this would certainly have a bearish effect on the greenback. The Institute for Supply Management (ISM) is to release the official reading at 15:00 GMT.

Hong Kong

Retail Sales

Annualized retail sales in Hong Kong probably decreased at a pace of 5.8% in October, according to the median estimate by experts, following a 6.6% gain in September. The latter has been the largest annual increase since January, when sales surged 16.7%. It has also been a second consecutive month of gains, which followed six successive months of declines. This indicator reflects the change in the total value of inflation-adjusted sales by retailers in the country and provides key information regarding consumer spending trend, while the latter is a key driving force behind economic growth. In case retail sales index dropped at a faster-than-expected pace, this would have a bearish effect on the national currency. The Census and Statistics Department is expected to release the official report at 8:30 GMT on Monday.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 7.7542. In case USD/HKD manages to breach the first resistance level at 7.7564, it will probably continue up to test 7.7580. In case the second key resistance is broken, the pair will probably attempt to advance to 7.7602.

If USD/HKD manages to breach the first key support at 7.7526, it will probably continue to slide and test 7.7504. With this second key support broken, the movement to the downside will probably continue to 7.7488.

In weekly terms, the central pivot point is at 7.7549. The three key resistance levels are as follows: R1 – 7.7580, R2 – 7.7610, R3 – 7.7641. The three key support levels are: S1 – 7.7519, S2 – 7.7488, S3 – 7.7458.