Weekly Outlook: Retail Sales Look To Give HKD Near Term Support

Fundamental: Comparative to the inflationary suggestions seen last week, traders will be eyeing more tangible reports including the consumer retail sales figure for the month of August.  Subsequent to the September Brunswick PMI report, retail sales are expected to rise by 7.5 percent, higher than the 7.1 figure witnessed in the month before. <For Full Story See Below>

Full Story: TheHong Kong dollar weakened further on the week, breaching the 7.7840 figure as the comparative Chinese yuan continued to surge ahead to record levels.  Now consolidating, the currency may be headed for a technical pullback as the current ceiling looks to be suppressing upcoming bids that may take the pair higher.  First up, bears will likely be eyeing the 7.7880 figure with plenty of support to cap a decline at the 7.7860.

Comparative to the inflationary suggestions seen last week, traders will be eyeing more tangible reports including the consumer retail sales figure for the month of August.  Subsequent to the September Brunswick PMI report, retail sales are expected to rise by 7.5 percent, higher than the 7.1 figure witnessed in the month before.  Volume of sales is additionally expected to rise by 6 percent.  With unemployment at a five year low, consumers are increasingly willing to spend income as economic prospects continue to be positive for the Asian country which is expected to rise at a 5.2 percent rate for the second quarter.  In addition, tighter labor competition for skilled workers is boosting incomes higher, supporting lifts in consumer confidence.  Subsequently, the report is expected to lift the tightly ranged currency against the base US dollar when coupled with the September Brunswick PMI survey.  Although positive results are expected for the survey, the rate of increase still remains questionable when compared to the most recent survey released in September.  Standing at 51.6, manufacturing sector activity declined incrementally against the 51.8 reading seen in July.  Still higher than the 50 minimum reading indicative of expansion, the figure was boosted by further increases in output and new orders as the private sector continues to expand on new business.  Finally, wrapping up the week will be the monthly foreign reserves amount.  Rising to $128.9 billion last month the regions credit rating recently was upgraded by Moodys as the economy sports one of the lowest debt levels in the world.

 Comparatively, last weeks data was less than positive as the overall balance of payments report was less than expected, boosted by a wider government monthly budget deficit.  Overall payments were short of the previous figure for the second quarter, rising by $10 billion, or 2.9 percent of overall productivity, versus a first quarter increase of $11.46 billion according to the Hong Kong Census and Statistics Department.  The slight pull back was attributed mostly to a wider deficit in the visible trade balance as import figures surged higher on increasing domestic demand.  With imports of foreign goods rising, the visible deficit rose to $35.4 billion in the second quarter, trumping exports on the period.  The sentiment seems to have been shared with the wider government monthly budget that presented a wider deficit on the month.  For August, the shortfall widened to 11.7 billion, more than three times the 3.4 billion seen in the month before.  Separately, money supply levels rose faster than expected, indicative of rising inflationary pressures.  For the month, M3 and M2 supplies rose above 14 percent with the more liquid M1 level rising 1.6 percent.  Previous declines in the M1 factor of 1.9 percent were contrary to the other two, sparking some sentiment of more moderate conditions.

Economic Releases for October 2 October 9

Technical:  USDHKD The USDHKD has rallied considerably following the break above the triple top at 7.7800.  The next target is the 7.8000 figure that the pair traded near for the first 5 months of 2005.  The USD rallied to 7.7959 on Friday but closed at 7.7919 leaving a long bearish wick on the daily candlestick chart.  This combined with divergent oscillators (daily) at Fridays high, overbought RSI, and extreme CCI favor a corrective move lower or consolidation.  Initial support is at the 9/19 high at 7.7871.   

Key Levels & Technical Indicators