Weekly Outlook: Thin Schedule May Keep HKD Inactive

Fundamental: With the schedule thin as thin can be, the sole report expected to move the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Hong Kong dollar will be the foreign currency reserves report.  Important to an economy, higher foreign currency reserves are likely to provide support for the Hong Kong economy as it churns ahead at an extremely healthy pace. <For Full Story See Below>

Full Story: Reversing last weeks advance higher, the USDHKD declined on the week after economic data was in favor of <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Hong Kong dollar strength.  Technically, the pair broke the range bound environment that had persisted at the end of last week with the price action breaking through support just above the 7.7900 handle.  However, the pair has comparatively pulled back slightly at the beginning of this week as bids were seen at the 7.7840.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

With the schedule thin as thin can be, the sole report expected to move the Hong Kong dollar will be the foreign currency reserves report.  Important to an economy, higher foreign currency reserves are likely to provide support for the Hong Kong economy as it churns ahead at an extremely healthy pace.  For the year, the economy is sporting a $1.8 billion surplus, the first in eight years as exports and domestic spending contribute heavily to the economys positive pace of growth.  Rising last month to $128.9 billion, the September report is expected to show further increases in reserves, cementing the economys place as the worlds eighth largest in the world.  Accompanied by the lowest debt levels in the world, the report subsequently boosted the countrys credit rating according to Moodys Investors Service.  Late last month, the credit rating agency boosted the countrys debt rating once again to an Aa3 rating from A1.  The fourth highest investment grade, the recent upgrade will likely spur further buying as investment funds continue to be concerned over looser monetary policy and widening deficits in other economies.

Comparatively, last weeks data confirmed the previous notions of expansion, furthering the Hong Kong dollars advances.  Although only restricted to a handful of reports, the significance of the surveys boosted Hong Kong dollar proponents.  Sparking off the positive vibe was the Brunswick PMI survey for the month of September.  Not only was the manufacturing economy expanding, but most components witnessed an equal or better improvement.  The overall index itself increased to a 53.7 print, increasing from a 51 seen in the month of August.  Both new orders and output figures grew sharply as underlying demand and market conditions purported the increase.  Additionally, notable spikes in wages and prices paid have spurred further speculation of an adjustment to the benchmark rate by the Hong Kong Monetary Authority.  Following the impressive manufacturing figures, the retail sales reports continued to suggest strong consumption patterns which will likely add to overall growth in the economy.  Expected to climb by only 6 percent, retail sales volume rose at a 6.4 percent clip.  Extending the string of advancements, the report continues to add to support of an expanding economy as consumers continue to form the base which is the current rate of growth.

Economic Releases for October 9 October 16

Technical: USDHKD The USDHKD fell to former congestion and bottomed at 7.7840 on Friday before rallying back to 7.7900 today.  RSI and CCI remain above midpoints of 50 and 0 but fell from extreme levels following Fridays decline.  Weekly RSI has declined from above 70 indicating that a larger turn lower is possible.  Resistance is at the 10/3 and 10/4 highs at 7.7935.  A break below 7.7840 exposes the 9/22 low at 7.7790.     

Key Levels & Technical Indicators